Why Inflation Is Structural, Not Temporary
June 20, 2026 · Frisian News
Central banks spent trillions after 2020, insisting inflation would be temporary. Two years later, inflation remains above target in most developed economies, driven by deglobalization, energy transition, and demographic shifts that are not going away.
Central banks spent trillions when COVID locked down the global economy in 2020. The Bank of England, Federal Reserve, and ECB flooded markets with new money. Inflation followed. Yet mainstream economists and central bankers insisted it was "transitory." Two years later, inflation remains above target across most developed economies.
The transitory narrative rested on one assumption: supply would bounce back quickly, demand would normalize, and prices would fall. It did not happen. Semiconductor shortages lasted years, shipping costs stayed high, and supply chains shifted from just-in-time efficiency toward redundancy. Meanwhile, labor markets never fully cooled. Workers quit, wages rose, and companies raised prices on consumers.
Central bankers now admit they misjudged. The Phillips curve, which predicted that tight labor markets would produce only modest inflation, broke, and inflation did not behave as the models said it should. Janet Yellen, now U.S. Treasury Secretary and former Federal Reserve chair, called inflation temporary in mid-2021, but by late 2022, central banks had raised rates sharply, conceding the original forecast was wrong. How many times must institutions botch the same call before people stop trusting them?
What is actually structural? Deglobalization, energy transition, and demographics are the real drivers. Reshoring production costs more than pure globalization did, green infrastructure requires investment and carries higher energy costs, and aging populations mean fewer workers and sustained wage pressure. These are not temporary shocks. They are the new baseline.
Central banks have done the easy work of fighting inflation. Fighting structural inflation requires either accepting permanently higher prices or accepting slower growth and higher joblessness. Central banks and governments will not choose the second, so they will treat the first as victory.
Published June 20, 2026 · Frisian News