Rising prices hurt everyone. This makes inflation a political hot button. After downplaying the threat initially, central banks are now in a tough spot.

There is a loud chorus of critics with ex-post claims that the inflation threat was there for everyone to see: if only central banks had raised interest rates earlier, we wouldn’t be in this mess. This is unfair. But rather than pushing back on this simplistic narrative, central banks have resorted to sounding ever tougher on inflation.

There is absolutely an urgent need to raise rates back to a neutral level that neither stimulates nor decreases economic activity. The problem: many central banks are now going further and are pledging to stamp out inflation, “whatever it takes”. That appears to be addressing the current politics of inflation. The actual economics of inflation are not that simple — and call for a more nuanced solution.