There are several reasons why economists and policy makers believe that inflation will not occur at the same levels as it did in the 1970s:
- Monetary policy: Central banks today have more advanced tools to control inflation, such as interest rate adjustments, quantitative easing, and forward guidance.
- Globalization: The increased integration of global economies has led to greater competition and a greater supply of goods and services, which can help to keep prices in check.
- Flexible exchange rates: Floating exchange rates make it easier for countries to adjust to changes in the global economy, which can help to prevent the kind of inflationary spiral that was seen in the 1970s.
- Increased transparency: Today, there is more information available about the economy, which can help policy makers to better identify and respond to inflationary pressures.
- Improved economic models: Economists have developed more sophisticated models to understand inflation and its causes, which can help to guide policy decisions.
- Inflation targeting: Many central banks have adopted inflation targeting as a monetary policy framework, which is a strategy to achieve a low and stable inflation rate.
All of these factors could help to prevent the type of high inflation that was seen in the 1970s. However, the economic environment keeps changing and some events could happen that could make it difficult to control inflation, like a big increase in the oil price, or a significant economic shock.