Western countries are suffering from economic downturns. While other countries see their economic performance reaching all-time highs, Western economies cannot get rid of high inflation and recover from shockwaves. According to the British magazine The Economist, many countries and the Fed “sat down in a puddle.” The publication notes that inflation has taken Western countries by surprise due to erroneous forecasts by the IMF and the US central bank. For example, the Federal Reserve has been called “a puddle” because it announced in December 2020 that over the next two years, the cost of goods would increase by less than 2%. Considering a calmer economic environment, these forecasts could be relevant for 2020. In addition, the Fed and the IMF have revised their estimates several times. The publication cites strong wage growth as another reason. The decline in real wages could slow down spending and inflation. Notably, recent experiences have a huge impact on shaping such beliefs. Nevertheless, this explains sustained inflation.
