There is a growing debate about whether the inflation that will arise over the next few months will be temporary, reflecting the sharp bounce-back from the Covid-19 recession, or persistent, reflecting both demand-pull and cost-push factors.

Several arguments point to a persistent secular increase in inflation, which has remained below most central banks’ annual 2% target for over a decade.

The first holds that the United States has enacted excessive fiscal stimulus for an economy that already appears to be recovering faster than expected. The additional US$1.9 trillion of spending approved in Mar...