The last time UK inflation was as high as it is now the British pound was linked to the now-defunct Deutschmark. In the US, the rate of price growth is the highest since 1982, which economic historians see as roughly the end of the 1970s “Great Inflation”. Eurozone inflation, meanwhile, is the highest it has been in the currency bloc’s history — unsurprising, perhaps, given soaring natural gas prices and the spectre of an inflationary war in Europe. Only Asia seems immune from the pressures.
It is clear that emergency stimulus is no longer required for economies with tight labour markets and high inflation. Yet central banks face hard choices over how fast and far to raise rates. Move too early and they risk choking off growth, while doing nothing to counter cost pressures that are more to do with Covid-related bottlenecks and geopolitical tensions. Move too