Amid growing concerns about rising inflation, United States Treasury Secretary Janet Yellen implicitly acknowledged the difficulty of dealing with the problem, when she said over the weekend that the key lies in getting Covid-19 under control. Inflation is running at a 31-year high in the US and is at multi-year highs in various parts of Europe as well as several emerging economies.
The pandemic and the policy response has indeed played a major role in fuelling inflation. Lockdowns and other restrictions prevented consumers from spending on services, so they splurged on goods. At the same time, restrictions curtailed supplies because of port and factory closures, shipping delays and the withdrawal of many workers from the labour market.