Sunday, June 7, 2026 at 11:00 PM
Original source
VoxEU — CEPR
MacroLab briefing generated by AI for informational purposes. Original reporting by VoxEU — CEPR. Not financial advice.
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After COVID hit in 2020, prices shot up almost everywhere in the world. But something interesting happened next: in some countries like the eurozone and Canada, inflation came down fairly quickly starting in 2022 and 2023. In others like the UK and especially the US, high prices stuck around much longer. Researchers at the Centre for Economic Policy Research looked at why the same global problem produced such different results. They found that the answer comes down to three things: whether a country had experienced high inflation in the past, how much energy prices affect everyday costs, and how much workers and businesses expect prices to keep rising in the future.
When inflation lingers, life gets expensive. If you're a worker, your paycheck buys less. If you're a saver or retiree, the money you've put away is worth less. Governments and central banks (the institutions that control interest rates) have to keep rates high longer to squeeze inflation out, which makes borrowing more expensive for mortgages, car loans, and business expansion. This can slow down hiring and growth. Countries that got inflation under control faster were able to lower interest rates sooner, letting their economies breathe. Countries stuck with high inflation for longer had to keep the financial brakes on harder and longer, which hurt jobs and growth more severely.
Watch wage growth and what people say they expect inflation to be in the future. If workers keep demanding big raises because they think prices will stay high, and companies keep raising prices because they expect costs to rise, inflation stays stuck like a hamster wheel. Also watch energy prices: when oil and gas jump sharply, does that immediately feed into everything else getting more expensive, or does it get absorbed more gradually? Finally, track actual inflation numbers month to month. If a country's inflation keeps falling toward 2 percent (the typical target), the problem is fizzling. If it bounces back up or stops falling, the underlying dynamics haven't been fixed yet.