Global activity has remained remarkably resilient to recessionary forces. A prolonged path of stagnation may spare the acute pains of recession but carries other costs.
Persistent excess demand sustains inflationary pressures, including through second-round effects that are particularly pronounced in the UK.
Policy needs to stay tighter for longer, increasing the hysteresis potential as rates need to defer demand ever further into the future, opposite to the 2010s’ regime.
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