What is critical in these circumstances is the occurrence of a capital flight, which may be triggered by a loss of market confidence in a country’s economic policy management resulting from an inflation or recession in that country.
During that adjustment, official inflation measures might be less informative than usual about capacity pressures. At the Bank, we are working to assess the impact that these shifts in spending patterns can have on measured inflation. During the shutdown, consumers have cut their spending on goods such as food away from home, airfare, clothing and gasoline and on services such as haircuts.