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Transitory Inflation

Transitory inflation is best described as a temporary or short-lived increase in the rate at which consumer prices are rising in an economy, but one that is not thought to last and where the inflation rate is expected to drop back again. This type of inflation might be caused by supply bottlenecks in an economy where short-term supply shortages drive up prices but then prices ease back down once extra supply comes on stream. in theory, transitory inflation should have little impact on inflation expectations of households and businesses. And a central bank might decide to keep monetary policy interest rates on hold if they perceive an acceleration in inflation to be transitory.

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