Permanent or transitory? Officials wrestle with inflation uncertainty

Bailey warns of possible damage to credibility, but Carstens urges caution amid high uncertainty

Andrew Bailey
Andrew Bailey
Photo: Bank of England

Senior central bankers and other officials continue to wrestle with the challenge of understanding inflation dynamics – and the even bigger problem of deciding what to do.

Central bankers face a dilemma as inflation rises around the world. On the one hand, climbing prices threaten their hard-won credibility. On the other, much of the rise in inflation comes from the supply side, which is generally considered out of reach of monetary policy instruments.

“Monetary policy cannot solve supply-side

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