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Inflation will probably melt away in 2022 – central banks will do far more harm trying to tackle it

The economy doesn’t have a real inflation problem, and not recognising the difference is the biggest danger.

It remains to be seen whether the omicron variant will shift Sars-CoV-2 towards becoming manageably endemic. But as and when this happens, there will still be “long COVID” to contend with. The latest headlines about inflation – a 7% annual rise in the US and more tough talk from Federal Reserve Chairman Jerome Powell about bringing it down – confirm that something similar is happening with the global economy: it will be shaped by the after-effects of the pandemic even when all restrictions have been lifted.

To understand how this overhang effect may play out in 2022 requires looking back at how the pandemic has affected growth and inflation. The key lies in decisions taken after the initial phase in 2020 when governments shut down large parts of their economies while compensating households and businesses for lost income to prevent an economic depression. People both saved more than usual and redirected their spending from services like eating out or travel to goods for the home – notably digital equipment for remote working and leisure.

Such goods started running out of stock and it took longer than usual for supplies to recover, not least because COVID restrictions had hit the global supply chain. The same went for other key consumer requirements such as energy: as demand for oil rebounded, the supply was constrained either by political decisions, such as the Opec+ cartel declining to raise production, or the financial fragility of US shale oil producers.

Shortages have caused inflationary pressure, which has also been aggravated by factors linked to the climate emergency. Since replacing coal with a “greener” fossil fuel in electricity generation is one of the quickest ways to reduce greenhouse gas emissions, there has been increased demand for natural gas. And in food markets, agricultural production has been damaged by the growing frequency of extreme weather events.

Misapprehensions about inflation

In many advanced industrial countries, headline inflation rose by the end of 2021 to its highest level in two decades: that annual rate of 7% in the US in December, and 5% in the eurozone (the two regions measure inflation in slightly different ways).

Meanwhile, the bounce in world economic growth in 2021 after the initial pandemic slump has been naturally giving way to a slower pace of growth. This is in line with more normal trends now that major economies have returned to, or are approaching, their pre-pandemic levels of output. This combination of slowing growth and rising prices – often labelled “stagflation” – is pernicious if it continues, attracting widely voiced concerns as 2021 wore on.

I would argue, however, that this threat is exaggerated. It stems to a considerable extent from a confusion between an increase in price levels and genuine inflation defined as persistent and volatile increases in the rate of price growth. This is a subject close to my heart, which I discuss in my 2013 book Remembering Inflation.

The price rises can be largely explained by this problem of suppliers being unable to provide enough goods to meet the rebound in consumer demand. And one key development which became apparent by the end of 2021 was that the supply of manufactured goods had recovered sufficiently to correct this inflationary imbalance.

UK inflation, 1960-present

Macro Trends

China has made the running here, along with other Asian manufacturing powerhouses. In November 2021, manufacturing inventories in Japan, South Korea and Taiwan were 20%-30% higher than the previous month. More generally in December, global industrial output was 12% higher than a year earlier, having shown a 5% annual contraction as recently as September.

This suggests not only that the stagflation threat will recede, but also that a “wage-price spiral” characteristic of any serious inflationary episode, is increasingly unlikely: this is where workers are able to demand higher and higher wages to make the rising cost of living affordable, which in turn further pushes up prices.

The central bank dimension

It follows that major central banks may err in going too far in their declared intention to raise interest rates to control inflation. The Bank of England has led the way by announcing its first post-pandemic rate hike in December (from 0.1% to 0.25%).

As for America, financial markets are pricing in a first rate hike by the US Federal Reserve in March – the same month as it aims to stop buying bonds and other financial assets as part of its quantitative easing (QE) programme to prop up the economy. Even the more doveish ECB recently announced a trimming of its QE programme, though it has no plans to raise interest rates this year.

Several commentators think these moves don’t go far enough. They argue that given the persistent threat of inflation, central banks should raise rates more aggressively and offload assets bought under QE programmes – which the Fed has signalled it might start doing by the middle of this year.

The difficulty for central banks is that prices could certainly keep increasing for a while. For instance, when the omicron wave subsides, demand for services like restaurants or travel should recover. Yet rather like someone with long COVID, the supply side in many of these industries remains “scarred”: numerous service businesses closed during the pandemic – witness the shuttered retail premises on high streets – and it can take time to raise working capital and re-hire the staff required to reopen. So just like in 2020-21 as regards goods, extra demand chasing too little supply could now push up prices in services.

Though raising interest rates won’t solve this problem, it’s the potential for a resulting wage-price spiral that is worrying central banks. Numerous developed countries have already been seeing pressure on wages developing naturally from the recovery of employment, since this means employees are in higher demand. This trend is being further intensified by labour shortages, largely caused by impediments to migration such as the difficulty of applying for H1B visas to the US and the UK government’s post-Brexit strategy of reducing migrant labour inflows.

Though concerns about wage pressure are well founded, they should nevertheless be offset by an important disinflationary impulse likely in 2022. In China, the first major economy to recover from the pandemic, the authorities are now relaxing monetary and fiscal policy (government spending) to counter the ensuing slowdown. But unlike previous Chinese stimulus drives in the years between the global financial crisis and the pandemic, which largely drove global growth, this latest easing only seeks to stabilise the economy. The Chinese fear further increases in the country’s indebtedness and the associated threat to stability.

With global supply chains returning to some kind of normality and China in this cautious mode, the overall effect will probably be that inflation eases of its own accord. If so, raising rates and quickly rolling back QE will just choke off recovery at a time when many countries are barely on their feet after COVID. The next problem could well end up being slowdown or even recession.

Brigitte Granville does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

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Economic Growth Forecasts Lowered On Longer Russia-Ukraine Conflict And Rising Inflation, Article Says

Economic Growth Forecasts Lowered On Longer Russia-Ukraine Conflict And Rising Inflation, Article Says
PR Newswire
NEW YORK, May 18, 2022

NEW YORK, May 18, 2022 /PRNewswire/ — A number of macro variables have deteriorated since our most recent eco…



Economic Growth Forecasts Lowered On Longer Russia-Ukraine Conflict And Rising Inflation, Article Says

PR Newswire

NEW YORK, May 18, 2022 /PRNewswire/ -- A number of macro variables have deteriorated since our most recent economic growth forecast at the end of March, said S&P Global in its article "Global Macro Update: Growth Forecasts Lowered On Longer Russia-Ukraine Conflict And Rising Inflation." We've marked down our GDP forecasts due to weaker first-quarter numbers in many countries, higher energy and commodity prices, a longer-than-expected Russia-Ukraine conflict, faster monetary policy normalization, and slower Chinese growth.

The global economy continues to face an unusually large number of negative shocks. 

"We now expect U.S. growth to decline by 80 basis points to 2.4%, eurozone growth to drop by 60 basis points to 2.7%, and China's growth to fall by 70 basis points to 4.2%. Changes to 2023-2025 are relatively minor," said Global Chief Economist Paul Gruenwald. "The balance of risks to our baseline has deteriorated since our last forecast and remains firmly on the downside."

The global economy continues to face an unusually large number of negative shocks. At the beginning of 2022, the effects of the COVID-19 pandemic were in retreat in most geographies. As a result, we forecast a robust but uneven rebound, with above-trend growth in most countries and moderately high but transitory inflation. The main questions were when economies would regain their pre-COVID-19 path of output, and what changes brought about by the pandemic would be structural.

Two developments have altered the macro picture. One is Russia's invasion of Ukraine in late February. This sent energy and commodities prices (even) higher for (even) longer and put a dent in confidence, which was at high levels. The second is inflation, which has turned out to be higher, broader based, and more persistent than thought just a few quarters ago.

This report does not constitute a rating action. 

Media Contact:

Orla O'Brien, New York (1) 857-407-8559

S&P Global Ratings is the world's leading provider of independent credit ratings. Our ratings are essential to driving growth, providing transparency and helping educate market participants so they can make decisions with confidence. We have more than 1 million credit ratings outstanding on government, corporate, financial sector and structured finance entities and securities. We offer an independent view of the market built on a unique combination of broad perspective and local insight. We provide our opinions and research about relative credit risk; market participants gain independent information to help support the growth of transparent, liquid debt markets worldwide.

S&P Global Ratings is a division of S&P Global (NYSE: SPGI), which provides essential intelligence for individuals, companies and governments to make decisions with confidence. For more information, visit



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New Digital Advancement Municipal Index shows the importance of digital access for U.S. cities’ prosperity

New Digital Advancement Municipal Index shows the importance of digital access for U.S. cities’ prosperity
PR Newswire
WASHINGTON, May 18, 2022

The Digital Advancement Municipal Index uses 16 key indicators to profile U.S. cities’ prosperity in the…



New Digital Advancement Municipal Index shows the importance of digital access for U.S. cities' prosperity

PR Newswire

  • The Digital Advancement Municipal Index uses 16 key indicators to profile U.S. cities' prosperity in the digital economy.
  • The index provides a resource for cities and states to uncover opportunities for targeted action as they prepare to respond to historic federal investments in broadband infrastructure and digital equity.
  • The index shows that while digital access and adoption are foundations for a vibrant city, they work jointly with other factors to improve quality of life.

WASHINGTON, May 18, 2022 /PRNewswire/ -- Today, Centri Tech Foundation launched the Digital Advancement Municipal Index (Muni Index), which uses 16 indicators from four categories – technology, socioeconomics, education, and housing – to capture and compare a city's overall prosperity and digital equity metrics across 308 U.S. cities with populations over 100,000 people.

Digital Advancement Municipal Index tool shows the impact of digital infrastructure on U.S. cities' overall prosperity

The interactive digital tool offers city leaders seeking to achieve digital advancement a clearer perspective on the greatest opportunities to drive impact in their communities.

"The Digital Advancement Municipal Index is an excellent resource for cities across the country," said Juliet Fink-Yates, the digital inclusion manager for the City of Philadelphia's Office of Innovation and Technology. "Philadelphia has made great strides to increase digital equity, and we're building on that progress with a 5-year plan to expand digital access across every neighborhood in the city. This index is a great tool to help us get there."

To measure technological advancement in each city, the Muni Index employs four metrics: average download speeds for households in a zip code or county, share of households with a desktop/laptop computer, share of households with broadband subscriptions, and percent of households with only a cellular plan and no other subscription. But access to technology alone does not automatically have a positive impact on a city's score; the extent to which digital inequities persist also matters. For example, the share of households with "cell only" access has a much greater negative impact on a city's score than greater speeds have a positive impact.

"Cities bring different assets to the table in fostering people's capacity to use digital tools to improve their lives. This index shines a light on cities' relative strengths and weaknesses as they embark on improving constituents' digital readiness. Users will not only understand levels of tech adoption, but also how they interact with other social challenges, such as housing affordability and a history of residential segregation," said Dr. John B. Horrigan, senior fellow at the Benton Institute for Broadband & Society and designer of the index.

The Muni Index is based on the premise that expansion in the availability, affordability, adoption, and quality of digital tools is essential to building a strong foundation for a vibrant and growing city. Yet digital access alone will not lead to better outcomes. The Muni Index demonstrates that how cities invest in technology works jointly alongside other factors that influence quality of life. It is this leverage of technology toward prosperity that defines Digital Advancement.

"Digital advancement aims to promote a genuinely inclusive digital economy, of which the impacts can be measured well beyond technology metrics. Access affects all facets of life today, from healthcare to education," said Laura Mueller-Soppart, program director at Centri Tech Foundation and co-designer of the index.

The insights drawn from the Muni Index, which is based on publicly available data sources such as the U.S. Census Bureau's American Community Survey, the Federal Reserve Bank of Chicago, and Microsoft broadband usage data, invite users to explore the relationships between a range of factors. For example, ensuring children have health insurance has a strong impact on a city's index score. Furthermore, cities with lower rates of residential segregation and a higher share of foreign-born residents have significantly higher-than-average scores.

By design, all indicators chosen for the index impact a city's overall score and none of the indicators are weighted. The mission of the Muni Index is to offer decision-makers a tool that helps shape holistic strategies that can deliver the greatest positive impact for city residents and regional neighbors.

"As the historic federal investments in broadband infrastructure and digital equity begin to open up, we're pleased to introduce the Muni Index as a resource for strategic planning," said Marta Urquilla, president of Centri Tech Foundation. "Cities and local coalitions have been working to address digital access, many long before the pandemic, and require added investment to expand their efforts. States are eager to collect data and develop competitive plans to attract federal dollars. The index offers a tool to help leaders maximize this once-in-a-lifetime investment, recognizing that digital advancement is essential to our shared prosperity."

Centri Tech Foundation's aim for the Muni Index is to leverage actionable data in service of its mission to promote an inclusive digital economy and achieve a future where everyone can fulfill their aspirations and thrive. The index is intended to facilitate the convening of stakeholders in building this future and set a baseline by which to study and measure progress. All the data that powers the tool is available for download to encourage research exercises to inform digital equity strategies throughout the U.S..

The Digital Advancement Municipal Index is an ongoing effort that is updated annually, as data sources permit. For more information and to provide feedback, visit

Methodology (2016-2019):
The Digital Advancement Municipal Index was developed using data from the American Community Survey and other sources to capture characteristics of 308 of the largest U.S. cities. The index is made up of 16 indicators, 4 each from the following categories: Technology, Socioeconomics, Education, and Housing. The mean of each indicator is normalized to 100. The category scores are composed by taking the mean of the four indicators within each category. A city's total Digital Advancement score is composed by taking the mean of all four of its category scores.

For the full methodology, visit

About Centri Tech Foundation
Centri Tech Foundation (CTF), along with a network of community development partners, seeks to connect low-income people to high-quality connectivity in the home and to resources that improve economic, health and livelihood outcomes in the digital economy. We believe digital advancement is a civil right. To achieve a sustainable future, one where everyone can fulfill their aspirations and thrive, requires an inclusive digital economy. Learn more at and follow @centritechfdn on social media.

About John B. Horrigan:
John B. Horrigan, PhD, is Senior Fellow at the Benton Institute for Broadband and Society, with a focus on technology adoption and digital inclusion. Dr. Horrigan has also been a senior advisor to the Urban Libraries Council and a senior fellow to the Technology Policy Institute. Additionally, he has served as an Associate Director for Research at the Pew Research Center, where he focused on libraries and their impact on communities, as well as technology adoption patterns and open government data. During the Obama Administration, Dr. Horrigan served on the leadership team at the Federal Communications Commission for the development of the National Broadband Plan.

Contact: Connie Jones, (850) 519-2912

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“Natural immunity” from omicron is weak and limited, study finds

SAN FRANCISCO, CA—May 18, 2022—In unvaccinated people, infection with the Omicron variant of SARS-CoV-2 provides little long-term immunity against…



SAN FRANCISCO, CA—May 18, 2022—In unvaccinated people, infection with the Omicron variant of SARS-CoV-2 provides little long-term immunity against other variants, according to a new study by researchers at Gladstone Institutes and UC San Francisco (UCSF), published today in the journal Nature.

Credit: Photo: Michael Short/Gladstone Institutes

SAN FRANCISCO, CA—May 18, 2022—In unvaccinated people, infection with the Omicron variant of SARS-CoV-2 provides little long-term immunity against other variants, according to a new study by researchers at Gladstone Institutes and UC San Francisco (UCSF), published today in the journal Nature.

In experiments using mice and blood samples from donors who were infected with Omicron, the team found that the Omicron variant induces only a weak immune response. In vaccinated individuals, this response—while weak—helped strengthen overall protection against a variety of COVID-19 strains. In those without prior vaccination, however, the immune response failed to confer broad, robust protection against other strains.

“In the unvaccinated population, an infection with Omicron might be roughly equivalent to getting one shot of a vaccine,” says Melanie Ott, MD, PhD, director of the Gladstone Institute of Virology and co-senior author of the new work. “It confers a little bit of protection against COVID-19, but it’s not very broad.”

“This research underscores the importance of staying current with your vaccinations, even if you have previously been infected with the Omicron variant, as you are still likely vulnerable to re-infection,” says co-senior author Jennifer Doudna, PhD, who is a senior investigator at Gladstone, a professor at UC Berkeley, founder of the Innovative Genomics Institute, and an investigator of the Howard Hughes Medical Institute.

A Weaker Infection

As the Omicron variant of SARS-CoV-2 spread around the globe in late 2021 and early 2022, anecdotal evidence quickly mounted that it was causing less severe symptoms than Delta and other variants of concern. However, scientists weren’t initially sure why that was, or how a weaker infection might impact long-term immunity against COVID-19.

“When the Omicron variant first emerged, a lot of people wondered whether it could essentially act as a vaccine for people who didn’t want to get vaccinated, eliciting a strong and broad-acting immune response,” says Irene Chen, co-first author of the new study and graduate student in Ott’s lab. Other first authors are Rahul Suryawanshi, PhD, a Gladstone staff research scientist, and Tongcui Ma, PhD, scientist in the Roan Lab at Gladstone.

To find the answer, the team of researchers first examined the effect of Omicron in mice. Compared to an ancestral strain of SARS-CoV-2 and the Delta variant, Omicron led to far fewer symptoms in the mice. However, the virus was detected in airway cells, albeit at lower levels. Similarly, Omicron was able to infect isolated human cells but replicated less than other variants.

The team then characterized the immune response generated by Omicron infections. In mice infected with Omicron, despite the milder symptoms, the immune system still generated the T cells and antibodies typically seen in response to other viruses.

“We demonstrated in this study that the lower pathogenicity of Omicron is not because the virus cannot take hold,” says Nadia Roan, PhD, an associate investigator at Gladstone.

That leaves other reasons that might explain why Omicron differs from other variants in terms of symptoms and immunity, including the lower replication seen with Omicron or the types of antibodies that the immune system generates in response to the virus.

No Cross-Variant Protection

To gauge how the immune response against Omicron fared over time, the researchers collected blood samples from mice infected with the ancestral, Delta, or Omicron variants of SARS-CoV-2 and measured the ability of their immune cells and antibodies to recognize five different viral variants—ancestral (WA1), Alpha, Beta, Delta, and Omicron.

Blood from uninfected animals was unable to neutralize any of the viruses—in other words, block the ability of any of the viruses to copy themselves. Samples from WA1-infected animals could neutralize Alpha and, to a lesser degree, the Beta and Delta virus—but not Omicron. Samples from Delta-infected mice could neutralize Delta, Alpha and, to a lesser degree, the Omicron and Beta virus.

However, blood from Omicron-infected mice could only neutralize the Omicron variant.

The team confirmed these results using blood from ten unvaccinated people who had been infected with Omicron—their blood was not able to neutralize other variants. When they tested blood from 11 unvaccinated people who had been infected with Delta, the samples could neutralize Delta and, as had been seen in mice, the other variants to a lesser extent.

When they repeated the experiments with blood from vaccinated people, the results were different: vaccinated individuals with confirmed Omicron or Delta breakthrough infections all showed the ability to neutralize all the tested variants, conferring higher protection.

“When it comes to other variants that might evolve in the future, we can’t predict exactly what would happen, but based on these results, I’d suspect that unvaccinated people who were infected with Omicron will have very little protection,” says Ott. “But on the contrary, vaccinated individuals are likely to be more broadly protected against future variants, especially if they had a breakthrough infection.”

“Our results may be useful not only to inform individuals’ decisions on vaccination, but also for the design of future COVID-19 vaccines that confer broad protection against many variants,” says Charles Chiu, MD, PhD, a professor of infectious diseases at UCSF and a co-senior author of the work.


About the Research Project

The paper “Limited Cross-Variant Immunity after Infection with the SARS-CoV-2 Omicron Variant Without Vaccination” was published in the journal Nature on May 18, 2022.

Other authors are Abdullah Syed, Camille Simoneau, Alison Ciling, Mir Khalid, Bharath Sreekumar, Pei-Yi Chen, Renuka Kumar, Mauricio Montano, Ronne Gascon, Frank Soveg, Ashley George, and Warner Greene of Gladstone; Noah Brazer, Prachi Saldhi, Miguel Garcia-Knight, Alicia Sotomayor-Gonzalez, Venice Servillita, Amelia Gliwa, Jenny Nguyen, Xiaohui Fang, Mazharul Maishan, Michael Matthay, and Raul Andino of UCSF; and Ines Silva, Bilal Milbes, Noah Kojima, Victoria Hess, Maria Shacreaw, Lauren Lopez, Matthew Brobeck, Fred Turner, and Lee Spraggon of Curative, Inc.

The work was supported by the National Institutes of Health (grants F31 AI164671-01, U54HL147127 and R21AI59666), the Natural Sciences and Engineering Research Council of Canada (PDF-533021-2019), the Roddenberry Foundation, Pamela and Edward Taft, the Howard Hughes Medical Institute, the Van Auken Private Foundation, David Henke, Emergent Ventures at the Mercatus Center (Fast Grants #2164 and #2208), George Mason University, the Innovative Genomics Institute, the US Centers for Disease Control and Prevention (75D30121C10991), Abbott Laboratories, and the Sandler Program for Breakthrough Biomedical Research at UCSF.

About Gladstone Institutes

To ensure our work does the greatest good, Gladstone Institutes focuses on conditions with profound medical, economic, and social impact—unsolved diseases. Gladstone is an independent, nonprofit life science research organization that uses visionary science and technology to overcome disease. It has an academic affiliation with the University of California, San Francisco.

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