Citi’s Mann Fears Virus Economic Hit Will Crimp Firms for Years

(Bloomberg) -- Bad news for central bankers trying just about everything to stoke inflation: Citigroup Inc. reckons companies’ pricing power is severely damaged.

Catherine Mann, the U.S. bank’s global chief economist, fears the pandemic has left so much slack in the economy that firms won’t be in a position to demand higher prices for some time. That, not just rising wages, is ultimately necessary for generating inflation.

In the euro area, consumer prices are falling, while a key measure of U.S. inflation rose in September at the slowest pace in four months.

“We get back to a trajectory for growth, but we do not return to the trajectory of global GDP that we had in place in January, pre Covid,” Mann said during a panel discussion hosted by the World Economic Forum on Tuesday.

Officials across major economies responded to the virus outbreak with record fiscal and monetary stimulus in a bid to prevent corporate insolvencies and ruinous levels of unemployment. The outlook is still bleak, however, and the International Monetary Fund this month warned of a tough recovery path ahead.

“The implications of that for workers, and for different age-group demographics, and for convergence of growth rates in emerging markets are all very dire,” Mann said.

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