Sumary of ‘Wake up’: markets warn central banks to get a grip on inflation:
- Financial markets fear the world’s leading central banks are risking “economic disaster” by misjudging the threat of rising inflation and not turning off the stimulus taps that have flooded the global economy with money.
- From the Federal Reserve to the European Central Bank, policymakers are grappling with a surge in prices not seen for decades while trying to keep wobbly economies on course to recovery from the ravages of the coronavirus pandemic.
- While central banks stick largely to the mantra that inflation is “transitory” and price pressures on everything from timber to turkeys will ease in the coming months, economists, business leaders and investors are ringing alarm bells.
- Julian Jessop, an independent economist who has worked at the UK Treasury and City firms, said most central banks were “well behind the curve” and that rising costs throughout the supply chain, such as in shipping, would continue to put upward pressure on prices well into next year.
- “Central banks need to respond to changing economic conditions,” he said.
- In reality, central banks would simply be taking the foot off the accelerator, rather than slamming on the brakes.
- The 6.2% jump in US inflation in the year to October stunned markets and highlighted huge increases in the cost of some consumer basics, such as a 46% rise in petrol prices and 11% for meat, fish and eggs.
- With pandemic-induced supply constraints set to continue for months and a wave of pent-up Covid consumer cash chasing a limited flow of goods, claims by the chair of the Federal Reserve, Jerome Powell, that inflation is transitory look increasingly hollow.