One of the most important questions in financial markets today is inflation. Over the past few months, investors have begun to worry that ultra-loose monetary and fiscal policies will trigger a sharp and persistent rise in prices across the board around the world once the worst of the pandemic is over. It is really crucial to know whether these fears are valid or not because rapid price increases could trigger all kinds of problems. For a start, just the fear of central banks raising interest rates could cause sharp corrections in financial markets. Yet, it is difficult to be sure that we will indeed see inflation raging in our midst. After all, economists are squabbling over what really causes inflation and cannot agree on how much inflation risk there is.

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