Frankfurt A look at absolute key figures is enough to visualize the dimensions of the problem: When the US Federal Reserve raised interest rates for the first time since 2018, inflation in the USA had reached 7.9 percent. At the first increase by the European Central Bank (ECB) since 2011, the inflation rate was even 8.6 percent.
How did it happen that the Fed, the ECB and the Bank of England, the leading central banks worldwide, underestimated the risk of inflation in such a way? The prominent economist Ricardo Reis has investigated this question in a new study.
The debate about the cause of the miscalculation is explosive: after all, it affects the credibility of monetary policy. And the belated reaction from monetary authorities is likely to result in a recession.
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