History's Inflation Lessons by Ari and Ratnovski
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History's Inflation Lessons by Ari and Ratnovski

1 December 2023


A study of 100 inflation shocks since the 1970s provides valuable pointers for policymakers today In the early 1970s, conflict in the Middle East set off a spike in oil prices that left central banks around the world scrambling to control inflation. After a year or so, oil prices stabilized and inflation started to retreat. Many countries believed they had restored price stability and loosened policy to revive their recession-hit economies only to see inflation return. Could history repeat? World inflation reached historic highs in 2022 after Russia’s invasion of Ukraine triggered a terms-of-trade shock akin to that of the 1970s. Disruptions to Russian oil and gas supplies added to COVID supply-chain problems to drive prices higher. In advanced economies, prices rose at the fastest pace since 1984. In emerging market and developing economies, the price increase was the largest since the 1990s.

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ANIL ARI is an economist in the IMF’s Strategy, Policy, and Review Department.

LEV RATNOVSKI is an economist in the IMF’s European Department.