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The Next Phase of Our Inflation Journey

The United States could achieve an inflation rate at or near the 2% target this year, with the real interest rate at a level that keeps supply and demand reasonably balanced. But, because structural shifts have diminished the supply side’s capacity to respond to demand-side pressures, the real rate can fall only so low.

SINGAPORE – What makes a journey? There is the destination, of course; but there is also the route one follows to get there, and the time it takes to complete it. This might be a useful framework for thinking about the future trajectory of inflation and interest rates – a journey with important implications for the cost of capital, valuations and multiples, debt sustainability, and more.