The recent surge in inflation in both the US and Europe has been blamed primarily on supply shocks. But a closer look suggests that the very central banks that are now being praised for reining in the surge in prices played a significant role in causing it.
SOFIA – Advanced-economy central bankers seem to have earned their summer vacation. With a series of sharp interest-rate hikes, they appear to have beaten back a wave of inflation that, according to the conventional wisdom, was caused by an unprecedented combination of negative shocks. But before we praise central bankers for taming inflation, we should consider their role in causing it.
SOFIA – Advanced-economy central bankers seem to have earned their summer vacation. With a series of sharp interest-rate hikes, they appear to have beaten back a wave of inflation that, according to the conventional wisdom, was caused by an unprecedented combination of negative shocks. But before we praise central bankers for taming inflation, we should consider their role in causing it.