Throughout almost all of our professional careers there has been one overriding dominant secular macro trend—that both inflation and interest rates have been continuously, or structurally, grinding ever lower. During the many cyclical ups and downs over the last four decades, the outcome of each economic downturn was inevitably that inflation ended up slightly lower than it was previously. The result was that deflation became the far bigger risk, and the Fed’s primary goal (as Ben Bernanke put it) became “Deflation – making sure ‘it’ doesn’t happen here.”

Today, however, with inflation the highest it has been in four decades and proving to be somewhat stickier (or less transient) than anticipated and with interest rates breaking above historical trendlines, questions are being asked as to whether or not we have reached the end of that secular journey and now are returning to a period of structurally higher inflation and interest rates.

In this Economics Weekly, we discuss the longer-term outlook for inflation and whether or not we really are entering a longer-term period of sustained higher inflation.

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Richard de Chazal, CFA, is a London-based macroeconomist covering the U.S. economy and financial markets.