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Sunday, June 07, 2009

Are inflation concerns inflated?

Too much output gap in the economy, why should we worry about inflation?

David Wessel of WSJ outlines the possible reasons that inflation can be a worry down the road. Among those he listed, I think inflation expectations matter most. As I mentioned many times before, we may end up with a 70s-like stagflation scenario.

What's new this time around is that most emerging economies are forecast to grow much faster than the developed world even you exclude exports to the US. And most of these countries are resources-energy intensive.