The question of how best to control inflation is back on the economic policy agenda, and opinion is divided about how to address it. The mainstream view emphasises the need for tighter monetary policies and regards higher interest rates and reduced liquidity provision as justified, even if they dampen the fragile economic recovery now underway in many countries. Others argue that today’s inflation is transitory, reflecting temporary supply bottlenecks and labour-market shifts, and will soon correct itself. In rich countries, policymakers still rely mainly on macroeconomic tools to tackle infla…

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