More than a Year into Central Banks’ Battle, Inflation Is Easing but Still a Concern

Inflation has been dominating the economic headlines for some time now, having forced central banks to take action and introduce substantial rate hikes. Although it’s still too early to declare victory, the good news is that inflation has started to ease in most countries. So far, the improvement is mostly due to lower energy prices, however. To make a lasting return to low inflation, central banks still have more to do to curb demand. That means keeping interest rates where they are, or higher still, for several more months to come. That’s not welcome news for borrowers, and it may seem counterintuitive that central banks are intentionally slowing the economy. But abandoning anti‑inflation measures too early would have even more serious consequences.