Olivier Blanchard argues we will return to very low real interest rates

 Olivier Blanchard argues that the current situation is a bump but that we will return to very low real interest rates and the same problems we had before.

Fed staff forecasts of March had unemployment staying at 3.5 per cent throughout the next two years and had inflation coming down nicely to two point something. That just will not happen.

3 per cent nominal interest rates with expected inflation above 3 per cent would not strike me as sufficient to slow down the economy and decrease inflation. 

Greek 10-year spread has increased by 93 basis points so far this year, and the Italian by 67 basis points over the same period. That could put the ECB in a difficult situation.

Martin Wolf FT 26 May 2022

https://www.ft.com/content/e63dab63-bf41-4c43-b827-1b1736fc518d