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The Boy Who Cried Inflation

Persistent warnings about rising inflation have proved to be false alarms. Could this time be different?

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Economists and central bankers have warned about a spike in inflation over and over again since the 2008 global financial crisis, but inflation remained low and investors subsequently numbed to the warnings. Could this time be different? Maybe.

The average inflation rate shrank in each of the prior four decades. It clocked in at 7.4% in the 1970s but declined to a tiny 1.8% in the 2010s. Unprecedented fiscal stimulus didn't lead to meaningfully higher inflation following the 2008 financial crisis, and in 2012, the Federal Reserve established a 2.0% inflation target that it couldn't quite reach. Near-zero interest rates and supportive fiscal policies have, at various points in the preceding decade, led to dire predictions of runaway inflation, but it never happened. No matter the efforts of central banks, inflation remained stubbornly low.

Emory Zink does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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