6 August 2025 - UN DESA’s Economic Analysis and Policy Division hosted a three-part Development Policy Seminar series in July to present new thinking on inflation. Discussions focused on issues such as inflation’s underlying drivers, its asymmetric impacts, and the implications for policy. The series will inform the World Economic Situation and Prospects, 2026.
 

Navigating an inflationary world

The first seminar explored the drivers of inflation, particularly trade cost shocks and inflation expectations. Pablo Cuba-Borda (Federal Reserve Board) demonstrated how trade cost increases, particularly for intermediate goods, create persistent inflationary pressures through firm-level cost structures rather than one-time price level shifts. Michael Weber (Purdue University) shared new cross-country evidence indicating that in high-inflation regimes, households and firms are less responsive to new information. The relative inattention can make it harder to change inflation expectations, thus reducing the effectiveness of monetary policy.
 

Inflation inequality

The second seminar highlighted the uneven effects of inflation on households, driven by differences in consumption patterns, income levels, and exposure to specific price categories. Orsetta Causa and Emilia Soldani (OECD) presented cross-country evidence from the recent inflation episode, showing that food and energy price increases disproportionately affected lower-income and rural households. Martin O’Connell, (University of Wisconsin–Madison) presented data on “cheapflation”, where price increases are disproportionately high in low-cost essentials, placing a relatively greater burden on households living in poverty. The session underscored how inflation exacerbates vulnerabilities and widens socioeconomic inequalities.
 

New approaches to a policy mix for combating inflation

The third seminar focused on how policy responses to inflation are evolving in the face of persistent challenges. Martin Wolf (University of St. Gallen) argued that supply disruptions can lead to a prolonged reduction in GDP and higher inflation. His work proposed that monetary tightening be complemented by countercyclical fiscal tools to support investment in key sectors. Jongrim Ha (World Bank) highlighted how monetary policy trade-offs between inflation and economic activity shifted during the post-pandemic inflation, when credible and well-sequenced policies ensured a historically low “sacrifice ratio” – reducing inflation with minimal loss of macroeconomic output.
 

Looking ahead

The seminar series offered an opportunity to discuss some emerging perspectives on inflation dynamics and policy. These insights will feed into the upcoming World Economic Situation and Prospects 2026 report, which will present a comprehensive analysis of inflation, including the lessons learned from recent episodes.

 

For more information on UN DESA’s work on macroeconomic analysis, visit policy.desa.un.org.