Why is inflation so low? The growing deflationary effects of Moore's Law

October 3, 2017

 

Part of Vanguard's Global Macro Matters research series

Understanding the current—and potentially future—state of the global economy helps investors put market movements into context. To promote that understanding, researchers from Vanguard Investment Strategy Group examine the economic trends that affect the investing environment in this series. Below are their latest insights into Global Macro Matters.

Why is inflation so low? The growing deflationary effects of Moore's Law

The global economy is at or near full employment, yet a decade after the onset of the Global Financial Crisis, central banks still struggle to achieve their 2% inflation targets despite years of extraordinary stimulus.

In this paper, we show that technology is an important—and often overlooked—factor in explaining why inflation has tended to fall short of the 2% targets as much as it has.

Use this paper to:

  • Understand why central banks are struggling to achieve their 2% inflation targets despite years of extraordinary stimulus.
  • Appreciate that advances in technology restrain the need for higher prices in every corner of the economy, not just in high-tech products.
  • Understand what could drive an unexpected turnaround in global inflation trends over the medium term.

Note:

  • All investing is subject to risk, including the possible loss of the money you invest.

 

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