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The real inflation culprits

By Daniel Gros

07 Aug 2023 · 3 min read

informed Summary

  1. Central bankers in advanced economies have been praised for taming inflation with a series of sharp interest-rate hikes, but their role in causing inflation should also be considered, argues Daniel Gros in PS.

SOFIA – Advanced-economy central bankers seem to have earned their summer vacation. With a series of sharp interest-rate hikes, they appear to have beaten back a wave of inflation that, according to the conventional wisdom, was caused by an unprecedented combination of negative shocks. But before we praise central bankers for taming inflation, we should consider their role in causing it.

The most commonly cited factor driving the recent surge in inflation is high energy prices, which soared after Russia’s full-scale invasion of Ukraine, owing to fears that Western sanctions would prevent Russian hydrocarbons from reaching markets. But, by early 2023, crude oil prices had fallen back to pre-invasion levels.

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