Inflation has continued to soar across much of the world and is significantly above central bank targets in most advanced economies. In the US. UK and euro area it is at its highest level in decades, raising concerns about a return to the ‘Great Inflation’ of the 1970s. In Fathom’s central scenario (70% probability), inflation returns to central bank targets next year. However, we assign a 30% probability to a ‘Back to the 70s’ scenario, where inflation expectations become unanchored, wage-price spirals re-emerge, and inflation dynamics briefly mirror those of the 1970s…

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