Financial TimesFinancial Times

Inflation’s return changes the world

By Martin Wolf

04 Jul 2023 · 4 min read

Editor's Note

Will the current inflation prove an enduring shift in the monetary environment or just a temporary one? Financial fragility makes the policy response hard to calibrate, writes the FT's Martin Wolf.

In high-income countries, consumer price inflation is running at rates not seen in four decades. With inflation no longer low, neither are interest rates. The era of “low for long” is over, at least for now. So, why did this happen? Will it be a lasting change? What should the policy response be?

Over the past two decades, the Bank for International Settlements has provided a different perspective from those of most other international organisations and leading central banks. In particular, it has stressed the dangers of ultra-easy monetary policy, high debt and financial fragility. I have agreed with some parts of this analysis and disagreed with others. But its Cassandra-like stance has always been worth considering. This time, too, its Annual Economic Report provides a valuable analysis of the macroeconomic environment.

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