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Mervyn King

Make No Mistake, the Risk of Inflation Is Real

For the first time in decades, two forces have converged — excessive stimulus and weakened political resistance.

Too much of a good thing?

Too much of a good thing?

Photographer: Frederic J. Brown/AFP via Getty Images

Price stability is when people stop talking about inflation and their decisions reflect genuine economic factors. It has been a long time since inflation was a talking point but, especially in the United States, it has reentered public debate.

In several advanced economies, evidence of rising input prices and higher output prices reflecting shortages is easy to find. Some of these increases may well prove transitory. For the first time since the 1980s, though, two factors make inflation a serious risk: excessive monetary and fiscal stimulus, and weak political resistance to the threat.