Misinterpreting inflation and the risk of recession
Will central banks continue to push up interest rates rapidly to ensure that inflation returns to their 2% inflation objectives, at the risk of triggering recessions? The answer to that question may hinge on how they think about inflation. Conventional measures of annual inflation remain high in the US and the eurozone. Although still above 2%, alternative measures that are more sensitive to current inflation pressures are much lower, particularly in the US. In this Macro Flash Note, EFG Chief economist Stefan Gerlach concludes that while continued tight policy is warranted in both economies, it is time for both central banks to slow the speed of rate increases.
