Eighteen months of inflation is not ‘transitory’

The big central banks have been insisting for months now that the rise in inflation is temporary, and will fade once the great awakening of the world economy starts to settle down. The Federal Reserve, Bank of England and the European Central Bank have looked on as inflation has overshot their forecasts. But when the opportunity to tame it with an interest rate hike approaches, the banks pass it up, reiterating instead that it is ‘transitory’ — the monetary equivalent of ‘it’ll be fine’.

With inflation now at a 30-year high in the United States — 6.2 per cent — it’s starting to look like a pretty big bump. But should we worry? Is this just a glitch of lockdown unwinding itself? As Ross Clark points out on Coffee House, inflation is being witnessed across all sectors of the economy in the US. It’s not just in hospitality, which is still waking up after 18 months in hibernation.