The ‘great inflation’ of the 1970s had many causes. The policy objective of full employment had already led to high inflation by the end of the 1960s. Two oil shocks and the depreciation of the dollar caused additional increases. The key factor was monetary policy, which was not adapted to the circumstances. It reflected the view that the Fed did not have a mandate to tolerate the sizeable increase in unemployment that might have ensued from the aggressive tightening needed to bring inflation under control. In addition, inflation was considered to be a cost-push phenomenon that could be addressed with wage and price controls. Today’s situation is very different. The Federal Reserve is an independent central bank and inflation expectations are well-anchored
Sentiment in the manufacturing sector improved further at the global level, driven by better numbers in the majority of advanced economies – where very high levels have been reached – whereas the picture is mixed in emerging countries. Nevertheless, in this part of the world as well, the PMIs are above the 50.0 mark, with the exception of Mexico.
The vaccine keeps its promises, so does Joe Biden. With USD 400 bn in stimulus checks nearly in pockets and partial immunity achieved against Covid 19, Americans are on the move to spend again. After a record-breaking month of March, private consumption surged by more than 10% (seasonally adjusted annual rate, saar) in the first quarter. GDP rose 6.4% (saar) and will continue to accelerate in the weeks and months ahead.
The situation in India continues to deteriorate with 382,146 new Covid-19 cases reported on 4 May alone, which has lifted the total to more than 20 million cases since the beginning of the pandemic. In Asia (excluding India), Europe and the Americas, the number of new cases continues to decline.
