We have been reminded that for all the authority economics commands, it is still a social science
Many major developments over the past year have departed from the consensus forecast, exposing the limitations of our understanding.
Suddenly, financial markets are entertaining the idea that policymakers can indeed achieve a soft landing: inflation returns toward its target level (around 2%) without the need for a recession and a sharp increase in unemployment.
For the past two decades, it has been fashionable among academic economists to assume that excess global savings have resulted in a lower natural rate of interest....
The long-term “new normal” would be much more normal indeed. Interest rates, finally, would remain above the actual or desired level of inflation.
Jim O’Neill Project Syndicate 21 July 2023
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