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The global struggle against inflation is about to intensify – and become more painful.

The world’s central bankers are sending a message: We can’t afford to take it slow and steady in the fight against inflation.

Governor of the Bank of England Andrew Bailey stated after hiking interest rates by 0.5 percentage points on Thursday that “high inflation can stay with us for longer” if action is not taken.

After more than a year of interest rate hikes, inflation has slowed in many nations, but it is still above the 2% level many central banks aim for.

The principal instrument available to central bankers to reduce inflation is an increase in interest rates. However, studies show that central bank policies take at least a year to filter through to the economy as a whole.

After 10 straight rate increases since last March, the Federal Reserve decided to suspend them at its June meeting. But many Fed members are sending signals that interest rates could rise again next month because many, like Bailey, are afraid of letting inflation get out of control.

Why does this moment feel so crucial?

The job of the central banker is a precarious one. There was hope that rate hikes wouldn’t severely harm their economies for a while. The passage of time, however, is catching up with us now. With inflation still higher than desired, the dangers of taking too much action to reduce inflation are comparable to those of taking no action at all.

In a recent speech, European Central Bank President Christine Lagarde compared rate hikes to a jet taking off for a new location.

She stated in a speech she gave earlier this month that the plane needed to rise steeply and accelerate quickly at first. But as it nears its destination, it can slow down without losing any of its forward momentum. The plane must gain altitude until it reaches its destination, but not beyond it.

Lagarde stated two weeks prior to the European Central Bank’s quarter-point interest rate increase that “the airplane is still climbing” and that it would continue to do so until it reached a sufficient speed to glide sustainably and land at its destination. The rate of inflation in the 20 nations that use the euro slowed to 6.1% in May from 7% in April.

Another way to look at Lagarde’s example is that the plane might not be able to reach its objective of 2% inflation if it doesn’t ascend high enough to a safe cruising altitude and encounters excessive turbulence.

That is precisely the source of their anxiety.

Inflation could become even more sticky.

Some sectors of the economy aren’t responding to rate hikes, which is part of the reason central banks have had such a hard time bringing inflation down. Consumer price index data from May shows, for instance, that non-energy service costs in the United States are 6.6% higher than they were a year ago. Even if the cost of services has increased by 5.2% since 2021, it is clear that these higher rates will not fall very soon.

When inflation gets sticky, or stays abnormally high, central banks have a tougher time bringing it down. Yet it’s not completely out of the question, either. To achieve the desired inflation rate, it is simply a question of how much economic pain they are willing to inflict through rate hikes.

However, according to Michael Bordo, director of the Center for Monetary and Financial History at Rutgers University and a professor of economics, delaying the decision can have unintended repercussions.

He warned that the longer they waited to tighten monetary policy, the more difficult it would be to bring inflation back down. This is because studies have shown that if inflation is left unchecked, it can become increasingly resistant to rate increases by central banks.

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