The world had begun to believe that the inflation crisis was receding. Central banks had reduced interest rates, supply chains had recovered and price pressures had eased. But the latest developments in the United States and Britain suggest that the struggle to restore price stability is far from over. The danger is no longer simply that inflation will remain high, but that efforts to contain it could undermine economic growth.

The Federal Reserve’s decision to raise its benchmark rate by a quarter percentage point, to 3.75-4.5 per cent, marks its first increase in more than three years. The move came despite President Donald Trump’s repeated demands for lower borrowing costs. Fed chairman Kevin Warsh has argued that inflation remains too high, while the central bank’s projections indicate the possibility of further increases. The decision underlines the tension between the political attraction of cheaper credit and the institutional responsibility to contain inflation.

Britain presents a related but more complicated picture. The Bank of England has held its rate at 3.75 per cent, but three of its nine monetary policymakers favoured an increase.........

© The Statesman