10 Dec 2021 14:05

Belousov expecting third wave of global inflation in 2022, regulators have difficult choice to make

Moscow. Dec 10 (Interfax) - The impact of Covid-19 on macroeconomic balances around the world was more significant than originally expected, and a third wave of global inflation is expected next year, which poses difficult challenges for regulators, Russian First Deputy Prime Minister Andrei Belousov said, speaking at the Made in Russia - 2021 international export forum on Friday.

"To be honest, we all underestimated the scale of Covid, the scale of the changes, at least I did. We were all so well-meaning last year that the post-Covid economy - it's certainly remote places, it's certainly remote relationships, it's certainly the disintegration of logistics, and it's the acceleration of digitalization - is all great, meaning that it will all be over in a couple years, we'll come to some standard. Today we see that the Covid story has significantly shifted macroeconomic balances - and the world has not yet found its point of equilibrium," he said.

"Inflationary waves are evidence of this. We are now going through the second inflationary wave and, obviously, there will be a third one. Because now the second wave is highly likely to generate the third wave, again related to food, which we will face in 2022, in the second half of the year especially," Belousov said.

"What's important here? We see that right now the biggest regulators of macroeconomic balances are facing a very serious fundamental choice. On the one hand, unprecedented inflation - 4% in Europe, over 6% in the U.S. - is something so incredible for these economies, and on the other hand, there is a huge debt overhang. And it is clear that a tightening of monetary policy now could work as a trigger for a collapse of the debt overhang and cause a debt crisis. There is a lot of talk about this now, including among international experts, but this is a real problem, and we have not passed this point yet - this point of uncertainty,"Belousov said about the difficult choice regulators face.

"How do we emerge from this situation? Elvira Sakhipzadovna [CBR Governor Elvira Nabiullina, also at the forum] is demonstrating an example - the key rate might by tightened, raised, but it must be said that not everyone is being so decisive," he said.