Report
It would be a worry if inflation were only a self-fulfilling phenomenon
When forecasters try to predict the future path of inflation, they see it as resulting from objective developments: Changes in commodity prices; The situation in the labour market. This approach is now leading to the prediction of a marked fall in inflation in 2022 compared with its peak at the end of 2021. But there is another possibility: that inflation depends only on expected inflation, that it is a self-fulfilling phenomenon. It would then suffice for economic agents to believe the economy is moving from an equilibrium with no inflation to one with inflation for high inflation to appear, without there being any objective cause for it, simply because companies want to adjust their prices and households want to obtain wage increases based on an expected inflation threshold . It is to be hoped that the “objective” approach prevails today rather than self-fulfilling inflation expectations.
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Natixis
Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.
Patrick Artus
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