Wolfgang Münchau

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Inflation expectations have gone up

My personal inflation expectations have gone up from something "close to, but above" 2 per cent to about 3 per cent
The first, and most important reason is that the ECB is not a true price stability advocate, but a central bank whose first priority is financial stability.
Wolfgang Münchau, Eurointelligence 5/12 2007

Globalisation is shifting into a phase, where it is no longer strongly disinflationary, but mildly inflationary due to a rise in global demand, especially for raw materials, energy, and transport services, goods where the supply cannot be quickly expanded.

The third reason is a secular shift in the balance of power from profits to wages, thus reversing a trend that has started in the 1990s.

This is happening because
a) it has always happened in the past; the profit/wage share fluctuates, but is mean-reverting, and
b) because of politics. Wage employees have suffered real income stagnation in the western world for over a decade, and there is a political backlash now to raise purchasing power everywhere.

Full text

The ECB, the Fed, and the Credit Crisis,
Wolfgang Münchau. 07.11.2007