Stagflation and bubbles in 2021: The worst possible scenario for central banks

In 2021, we expect in OECD countries: Not very vigorous growth , due to the numerous factors slowing down activity: corporate debt, household uncertainty; Rising inflation, in particular as a result of the fall in labour productivity and the rise in unit production costs, given the new health standards implemented in companies due to the coronavirus crisis; Asset price bubbles (equities, real estate, etc.) as the massive liquidity created by central banks will be invested in riskier assets. So there is likely to be stagflation (sluggish growth, higher inflation) and bubbles, i.e. the worst possible situation for central banks. Should they stimulate growth or should they fight the rise in inflation and asset prices? This choice is made even more difficult by the very high level of public debt.