Report
The disappearance of the inflation cycle may lead to the disappearance of real economic (growth) cycles
We are now seeing in OECD countries that inflation no longer rises late in the expansion period. This results from the weak reaction of labour costs to declining unemployment; the weak reaction of prices to rising labour costs, and the reaction of US shale oil production to rising oil prices. The absence of rising inflation late in the expansion period makes it possible to keep interest rates very low and lends credence to the theory that real economic cycles have disappeared: growth could land “softly†at the level of long-term growth and stay there, in which case there would be no more recessions and therefore no more recoveries, as the continuation of low interest rates would eliminate the leading causes of recessions in the past (fall in investment, debt crises, collapse in asset prices).
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Natixis
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Patrick Artus
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