Inflation’s decline will not be as dramatic as its rise

What really matters for policymakers is not where inflation turns but how quickly it slides towards a level they are comfortable with.

Our bet is that this level is between 2 and 3 per cent. Yet there’s much to suggest price pressures could stick around the 4 to 5 per cent mark for some time yet.

The possibility of a sluggish shift back to 2 per cent is not just about the risk presented by energy prices, substantial though it might be.

While monetary policymakers, including Fed chair Jay Powell, have been keen to heap the blame for failing to spot inflation on supply chains and the war in Ukraine, that’s not the only element that has been driving prices higher.

As Stephen Cecchetti, of Brandeis University, put it: “It is odd that central bankers are focusing so heavily on supply-side inflation when demand is such a big component of the surge, especially in the US.”