The benefits of inflation in the era ahead

HAVING spent more than 40 years indoctrinated by the inflation-fighting mantras of central banks around the world, the world's reaction to the highest year-on-year consumer price inflation in the United States since the early 1980s and in inflation-phobic Germany since the integration of East Germany in the early 1990s is hardly surprising.

However, the world should not underestimate the important role that inflation can play in 2 key transformations - delevering of the global economy and the battle against climate change - that lie ahead for the global economy in the coming decade.

First, inflation can serve as an important policy anchor to address the high level of debt that has built up in the global economy over the past decade.