completing the work on inflation
It seems logical that the central bankers are concentrated on completing the task of returning inflation to target. This is crucial for low-income nations and families in particular, as they have been disproportionately impacted by rising prices.
However, the much-needed decrease in inflation implies that major central banks will have to carefully decide when and how much to lower interest rates this year.
Policymakers need to keep a close eye on underlying inflation developments to avoid relaxing too soon or too quickly, since core inflation is still high in many countries and there are still upside inflation risks.
However, nations should make sure that interest rates are not maintained at high levels for an extended period of time when inflation is obviously approaching the target.
One excellent example of how quick thinking may pay dividends in policymaking is Brazil’s early and determined response to rising inflation during the pandemic.
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