On the upside, there were price rises associated with the early supply- side disruptions and frictional costs of adjusting supply chains, that fortunately proved mostly transitory and “second order” in terms of contributions to overall inflation. But these cost-push factors could well rise again and thus bear close monitoring. 8. In the labour market, it is noteworthy that wages did not fall in several major economies. Wage growth was 4.8% in the US last year, 2.7% in the Eurozone, 4.3% in China, and 1.4% in Singapore. Part of this reflected some degree of nominal wage rigidity, induced by the roll-out of substantive wage subsidies meant to reduce the incidence of job separation in the initial stages of the crisis. Another statistical issue may have led to mismeasurement here. As a disproportionate number of lower wage workers became unemployed during the crisis, more so than during earlier downturns, compositional changes in employment would have led to overestimates of wage growth. The usual aggregate average wage series are typically not based on a fixed set of jobs or workers in continuous full-time employment. [1] 9. Second, at this stage, the risk of disinflation has receded as prices are oﬀ their local minima and underlying cost and consumer price pressures are picking up, though only gradually alongside the growth rebound. The IMF generally expects contained inflation pressures in most countries [2] . Higher commodity prices will mechanically raise consumer price indices in the short term.
These include the slope of the Phillips Curve, central bank’s policy responses together with the constraints imposed by elevated public debt levels, and importantly, agents’ expectations. Expectations in Macroeconomics 12. This brings me to my second set of comments. One of the truly revolutionary developments in macroeconomic analysis has been the recognition that expectations are central to the behaviour of agents. Most of us would probably reach back to at least Keynes’ General Theory, as marking its formal induction into general equilibrium macroeconomics. The theory and practice of macroeconomic expectations has evolved quite rapidly since then. In particular, Robert Shiller and George Akerlof were key figures in formalising the idea that changes in expectations may manifest as exogenous shocks rather than factor in endogenously as posited by the theory of rational expectations, thus giving analytical form to Keynes' “animal spirits” in macroeconomic research. [3] 13. More recently, Shiller and Akerlof have also led a revival in the interest of expectations in economics [4] . Placing a modern contextualisation to “animal spirits”, they describe it as “a restless and inconsistent element in the economy. It refers to our peculiar relationship with ambiguity or uncertainty. Sometimes we are paralyzed by it. Yet at other times it refreshes and energizes us, overcoming our fears and indecisions.” I think we can quite easily relate to such descriptions. We have seen the importance of expectations in determining aggregate outcomes during crisis, as well as in specific markets and cycles.