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Illustration: Annelise Capossela/Axios

Right now, we’re in the thick of it. Inflation is coming in hot, and it’s all around us.

The big picture: Much of the current debate centers around when the current bout of inflation will peak and how long it will last.

  • But it's also worth looking farther out into the future. After supply chain snarls begin to ease and monetary policy starts tightening, the long-standing economic trends that underpinned the last two decades of low inflation will still be around.

Why it matters: Those trends, like the rapid pace of technological innovation and globalization, have helped keep a lid on price growth since the 1990s. And those dynamics aren't going anywhere.

  • “There are some very powerful forces at work over the longer run that will put downward pressure on prices,” Kristina Hooper, chief global market strategist at Invesco, tells Axios.
  • The market's view, via 5- and 10-year breakevens, is that inflation will moderate over the long haul.

State of play: Technological advances are a big factor — for example, the cost of flat-screen TVs 10 years ago, compared to now.

  • "We see technology not only improving the product but taking down the price of the product. That tends to be a deflationary force," Hooper notes.
  • Meanwhile, the new remote work environment has turbo-charged the efforts of companies across all sectors to digitize and automate — moves that usually lead to cost reductions.

And globalization — the ultimate deflationary force — is not going away, as economist Megan Greene outlines in this FT column.

  • Still, over the next 20 years, globalization may look very different from the past two decades. And those differences will determine the extent of its deflationary impact, says Liz Ann Sonders, chief investment strategist at Charles Schwab.

What's happening now with supply chain resiliency is more along the lines of "diversification, as opposed to de-globalization," Sonders says.

  • Manufacturers and retailers are looking for ways to diversify supply chains and move away from "just in time" inventory strategies that leave little wiggle room for supply shocks. We may see more manufacturing migrate out of China to other parts of Asia, or closer to home in Latin America.

Meanwhile: Worker power, which produces higher wages, has been on the decline for several decades (higher wages can translate to higher prices).

  • Union members' share of the workforce in 2020 was half of what it was back in 1983. And the total number of strikes in recent years pales compared to the norms across the 1950s to the 1980s.
  • Wage gains this year have not kept up with inflation.

The bottom line: No one knows for sure when the current period of inflation will peak. But when it does, these long-term forces will still be at play.

Go deeper: Retailers are having a foot traffic problem

Go deeper

What Biden's Fed nominations mean for policy

Sarah Bloom Raskin at a 2013 hearing. Photo: Andrew Harrer/Getty Images

Now that President Biden's long-awaited nominations for vacant seats on the Federal Reserve Board of Governors have dropped, the big question is how Sarah Bloom Raskin, Lisa Cook, and Philip Jefferson, if confirmed, might shift policy.

  • The answer: Don't expect any big changes to the central bank's policy direction overnight — but do expect it to prioritize a healthy labor market more in the years ahead.

Why it matters: The Fed's actions shape the economy in ways that outlast the presidents who appoint them — and the Biden-appointed Fed looks to be a more explicitly pro-worker central bank than we've seen in modern times.

The big picture: With inflation running hot, the Fed is in the midst of a pivot to more hawkish monetary policy — possibly including raising interest rates in March.

  • Raskin, Cook, and Jefferson are unlikely to stand in the way of that pivot, and not just because the slow-moving Senate confirmation process means it will likely be well underway before they are confirmed for their new jobs.
  • The Fed is a consensus-driven institution, and the consensus has swung decisively in a hawkish direction in the last three months. Even normally-dovish officials like San Francisco Fed President Mary Daly and Chicago Fed president Charles Evans on board with the policy shift.

But over time, the new additions to the Board of Governors — who have a permanent vote on monetary policy, unlike regional Fed presidents who rotate — have emphasized the importance of running a hot labor market in order to achieve gains for workers and greater racial equality.

  • That implies the three new governors would resist continuing to push interest rates higher once inflation moderates.

What they're saying: "Inflation is so high and political pressures on the Fed are so strong (including from Democrats), that we doubt they will push hard against the will of the committee," wrote Roberto Perli and Benson Durham of Cornerstone Macro, in a client note.

  • But, they add, "Because all of them have expressed views in favor of broader expansion of the labor market, … we can expect them to resist substantial tightening in the future."

Regulatory policy is a different matter. If confirmed as vice chair for supervision — and Republican Senators will try to stop that from happening — Raskin would have more explicit power over a wide range of regulatory policy, and look to rein in the deregulatory impulses of her predecessor, Trump appointee Randal Quarles.

The bottom line: As the Biden Fed takes shape, it will include more voices focused on workers than in modern memory. But the course of policy depends on whether inflation trends allow them to act on those instincts.

Updated 30 mins ago - Politics & Policy

Omicron dashboard

Illustration: Shoshana Gordon/Axios

  1. Health: Axios-Ipsos poll: Omicron's big numbersAnother wave of death — FDA limits use of Regeneron and Lilly antibody treatments — Fauci: "Confident" Omicron cases will peak in February.
  2. Vaccines: Pfizer begins clinical trial for Omicron-specific vaccine — The shifting definition of fully vaccinated.
  3. Politics: Biden admin withdraws temporary vaccine-or-test mandate for large employers — New York Supreme Court strikes down Gov. Hochul's mask mandate for public areas — Sarah Palin tests positive, delaying defamation trial — Virginia school boards sue Gov. Youngkin for lifting mask mandate.
  4. World: U.K. to lift travel testing requirement for fully vaccinated — Beijing Olympic Committee lowers testing threshold ahead of Games.
  5. Variant tracker

The Robinhood M&A rumor mill churns

Illustration: Sarah Grillo/Axios

Robinhood's valuation is now just over $11 billion, a fraction of where it traded in August and below that of its last private round of funding. Cue the M&A mongers.

Why it matters: It's not just Robinhood—falling values of growth-oriented tech stocks have raised speculation that formerly high-flying fintechs could be snapped up by more well-capitalized buyers.