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Will Trump’s fiscal stimulus lead to inflation?
Without a surge in monetary growth, fiscal policy alone doesn’t indicate inflation
By John Greenwood, Chief Economist
Financial markets have reacted strongly to the election of US President Donald Trump. While equities in the US and elsewhere have risen strongly (reflecting expectations of stronger growth and therefore improved corporate earnings), bond prices have fallen (reflecting higher yields, in turn a result of higher inflation expectations). As debate continues around President Trump’s fiscal stimulus program, a key question has emerged: What role might his policies play in creating inflation?
A large fiscal deficit does not necessarily lead to inflation
Among the main drivers of higher inflation expectations, one is...
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