Almost a decade of unprecedented ultra-easy monetary policy has failed to generate the modest inflation that rich-country central banks are mandated to achieve. Yet they may be about to get help from an unlikely source: China.
Rising export prices from China may succeed, to a degree, in imparting the inflationary impetus that has eluded advanced economies despite money-printing on a vast scale, negative interest rates on $10tn worth of global bonds and ever-tighter labour markets.
But there are no grounds for rejoicing, for China will be exporting “bad” inflation. Prices are being pushed up by rising costs and a gusher of liquidity — the result of years of excessive monetary stimulus, a refusal to let capital flow freely and Beijing’s top-down campaigns to clean up the environment and reduce unwanted capacity in heavy industry.