The Great Inflation Resurgence

“As inflation is receding in Europe and North America, the volume by Harr and Henderson on the great resurgence in inflation in the recent past offers an excellent overview of why it arose and of how it developed; it also neatly draws on and confronts the perspectives of a central bank and a financial sector economist. A further strength of the exposition is its global perspective, comprising also the milder experiences of Japan and China. This book will be useful to a wide-ranging readership including academic economists for putting more specific analysis into perspective, financial market analysts, and a more general public, appreciative of an accessible survey of a central economic experience.” —Niels Thygesen, Chairman, European Fiscal Board; Professor Emeritus at University of Copenhagen “This book provides a sensible and straight-forward account of the recent resurgence in inflation, written by a central bank economist (Danish) and a market practitioner, together with some reasonable and sound projections for macro developments in coming years. It is written in straight forward language, with good use of charts. Well worth the read.” —Charles Goodhart, Professor Emeritus, Financial Markets Group, London School of Economics; author of The Great Demographic Reversal This book explores why inflation surged globally in the 2020s, where we are heading and what lessons we can draw from it. Following a decade of too-low inflation, inflation suddenly surged in 2021-22 to its highest levels in 40 years in the US and Europe. The book introduces a simple economic framework and adopts a global perspective to compare the inflation experiences across the US, Europe, and Asia. Among the key questions the authors tackle is 1) why the West suddenly experienced surging inflation when their central banks had been fighting too-low inflation in the 2010s, 2) why so few economists saw the inflation resurgence coming, and 3) why China now faces deflation. The great inflation resurgence has taught us several key lessons, namely that inflation is a global phenomenon with local characteristics, that economists should rely more on broad economic thinking, and less on models when shocks occur, and finally that fiscal policy is a major differentiator. The authors, a central banker and an economist on the ‘buy side’, offer key lessons for both central banks and financial markets while anticipating where inflation might be headed. Thomas Harr is Chief Economist and Assistant Governor at Danmarks Nationalbank, which is Denmark’s central bank, and manages the economic and monetary policy department. Before joining the central bank in 2021, Thomas worked in investment banking for more than 16 years, including roles as Global Head of Research at Danske Bank and Head of Local Market Research at Standard Chartered in Singapore. Thomas holds a master’s degree in economics from the London School of Economics and a PhD in economics from the University of Copenhagen. Callum Henderson is Senior Director, Economic Analysis for CDPQ, Canada’s second-largest pension find, based in Singapore. Prior to joining CDPQ, Callum worked in banking for 17 years, including roles as Global Head of FX Research at Standard Chartered Bank and Head of Emerging Market Research at Bank of America. Callum has an MA in Middle East Politics and Economics from the University of Exeter, a DEF in French Studies from University of Tours, and a BA in Politics, French and Economics from the University of Sunderland.