Inflation in the US (and in my view also in the UK and the Eurozone) has peaked. This is at least in some part due to nominal wages not keeping up with inflation and thus not fuelling a wage-price spiral as we have seen in the 1970s. But the emergence of a wage-price spiral where higher inflation begets higher wages and higher wages, in turn, beget higher inflation is not off the card, yet. It is one of the possible risk scenarios for 2023 that we must understand.
How a wage-price spiral looks like
How a wage-price spiral looks like
How a wage-price spiral looks like
Inflation in the US (and in my view also in the UK and the Eurozone) has peaked. This is at least in some part due to nominal wages not keeping up with inflation and thus not fuelling a wage-price spiral as we have seen in the 1970s. But the emergence of a wage-price spiral where higher inflation begets higher wages and higher wages, in turn, beget higher inflation is not off the card, yet. It is one of the possible risk scenarios for 2023 that we must understand.