A Global Approach Is Needed to Beat Inflation

Inflation invites discontent, because wages purchase less as the prices of goods and services rise. Central bankers, including those in the US and China, should cooperate in combating inflation, urge Adam Posen and Arvind Subramanian of the Peterson Institute for International Economics in an essay for the Financial Times. By resisting tighter monetary policies and expecting other nations to handle the adjustment, China and the US play a “dangerous game of chicken,” Posen and Subramanian note. This prolongs economic damage and pain, while raising associated costs of repair. The two economists suggest that global cooperation could reduce the extent and duration of higher interest rates for nations, allow central bankers to withstand domestic pressures to lower rates, and reduce manipulation of commodity prices. “Grand schemes for macroeconomic policy co-ordination have a mixed record,” the two writers admit. But that doesn’t mean that global leaders should just give up on combating the very real and dangerous threat of global inflation. – YaleGlobal