Who can put the toothpaste of inflation back in its tube?

The UN Food and Agriculture Organisation’s food price index rose 13 per cent last month to stand a third higher than a year ago. Within the index, cereals rose by 17 per cent – driven by interrupted Ukrainian and Russian wheat supplies – and vegetable oils by 23 per cent, Ukraine being the world’s biggest sunflower farmer. In the UK, wholesale milk is up 20 per cent, as farmers face rising fuel and feed costs. Supermarkets squeeze suppliers to suppress retail prices: but soon, around the same time as our next quarterly gas bills, we’ll feel the full impact at the checkout. And then what?

We may be on the cusp of ‘a new inflationary era’, says Agustin Carstens of the Bank for International Settlements: interest rates must rise, however painfully, to fight it. But by how much and to what effect, given that this surge is a crisis of physical supply rather than a monetary phenomenon? And where are the Paul Volckers (of the Fed) or Karl-Otto Pöhls (of the Bundesbank), those granite-hard currency custodians of old whose mission was price stability above all? I recall Pöhl’s words from 1980: ‘Inflation is like toothpaste: once it’s out of the tube, it is all but impossible to get it back in.’