“Price stability is the responsibility of the Federal Reserve and serves as the bedrock of our economy. Without price stability, the economy does not work for anyone. In particular, without price stability, we will not achieve a sustained period of strong labour market conditions that benefit all.” Thus did Jay Powell, chair of the Federal Reserve, open his press conference after the meeting of the Federal Open Market Committee on November 2 at which it was decided to raise the rate on federal funds by 0.75 percentage points to 4 per cent. He was right. It is the duty of the state to ensure that its money has a predictable value. Central banks are entrusted with this task. Recently, they have been failing badly. It is a necessity and an obligation to rectify this failure.

Between September 2019 and September 2022, headline levels of consumer prices, which are the ones relevant to people, rose 15.6 per cent in the US, 14.1 per cent in the UK and 13.3 per cent in the eurozone. If central banks had hit their targets, these price levels would have risen just over 6 per cent.

There are good excuses for this failure, notably the disruptions caused by Covid-19 and then Russia’s war on Ukraine. Yet the outcome is not just due to supply shocks. In the three years to the second quarter of 2022, nominal demand expanded 21.4 per cent in the US, 15.8 per cent in the UK and 12.5 per cent in the eurozone. This is equivalent to compound annual growth of 6.7 per cent in the US, 5 per cent in the UK and 4 per cent in the eurozone. These rates of growth of demand are simply inconsistent with 2 per cent inflation in these economies, especially in the US and UK.