By
Bilal Hafeez
24-11-2020
How COVID-19 Kills Inflation
(3 min read)
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Yet again, everyone sees nothing but inflation following a sharp downturn. Just like after the 2008 financial crisis, policymaker, analyst and investor consensus looks for inflation to pick up in the years ahead. The argument goes that massive central bank intervention coupled with large fiscal deficits will finally see the printing of money reach the real economy. Throw in populist governments that will ensure workers’ bargaining power and you have the perfect recipe for meaningful inflation.
But these arguments confuse the symptoms for the underlying cause. The reason for the policy interventions is an incredibly weak economy – surely something that would not be inflationary. Moreover, the structural forces COVID has brought about will, if anything, dampen the one area where inflation has been present: services.
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