The US and EU Warn of 'Global Stagflation'

Former Prime Minister Monti: "Greatest Threat to European Economy"... Professor Rubini Also Points Out Crisis
Economist: "Stimulus Measures Fuel Inflation... Policy Must Change"

Former Italian Prime Minister Mario Monti [Photo by Reuters Yonhap News]

[Asia Economy Reporters Byunghee Park, Suhwan Kim] Voices warning of stagflation are growing mainly in advanced countries such as the United States and Europe. Concerns are spreading that while the pace of economic recovery is slowing down, inflationary pressures will continue.

On the 4th (local time), former Italian Prime Minister Mario Monti warned in an interview with CNBC that the biggest threat to the current European economy is stagflation. Prior to Monti, New York University professor Nouriel Roubini also pointed out that if the U.S. central bank, the Federal Reserve (Fed), fails to properly address rising prices, the U.S. economy could face a stagflation crisis.

Amid forecasts that the U.S. economic growth rate will fall from 6.5% in the second quarter to 2-3% in the third quarter, concerns about inflation remain. Last week, the European Union (EU) statistics office announced that the Eurozone's consumer price inflation rate for August reached 3%, the highest in 10 years. The U.S. core consumer price inflation rate for August, to be released on the 14th, is expected to remain at 4.3%, the same as in July.

American consumers are browsing Walmart stores.
Photo by AP Yonhap News

Former Prime Minister Monti pointed out that large-scale fiscal and monetary policies to stimulate the economy are causing price increases, but there are still many constraints to flexibly increasing production. Supply chain disruptions in Asia are also affecting the European manufacturing sector. He noted that this problem is not limited to Europe and that many countries could experience stagflation similar to what they faced in the 1970s. The British economic weekly The Economist also diagnosed that as the world adapts to COVID-19, the risk of stagflation in the global economy is increasing.

Meanwhile, the supply chain bottlenecks constraining the global economy are expected to continue for the time being. The Wall Street Journal, citing U.S. port officials, predicted that global supply chain disruptions could last until the end of next year if prolonged. Last month, it is estimated that 2.37 million import containers, the largest number since related statistics began in 2002, arrived at major U.S. ports. Severe supply chain disruptions that could stimulate prices are continuing.

The Economist advised that since the impact of COVID-19 on the global economy has changed, policymakers’ responses must also change. It warned that policies that both restrict movement to prevent virus spread and provide stimulus should no longer be repeated. The Economist pointed out, "If the Delta variant affects service industries such as leisure and accommodation, stimulus measures will only fuel inflation."

This content was produced with the assistance of AI translation services.