The Case for (Eventual) Inflation

Most investors came of age during a persistently disinflationary environment. Given the disinflationary demand shock caused by the coronavirus pandemic, that backdrop is likely to endure for the next several years. However, the combination of massive unconventional monetary policy and the increasing willingness of policymakers to take advantage of historically low interest rates and embrace the aggressive use of fiscal policy could eventually set the stage for a medium-term shift in the inflation backdrop.