Topic: Will central banks ultimately fail in their goal of lowering down inflation? (Read 724 times)

The FED's strategy seems to be working but if it decides to back down early, then everything would be nothing but lost. It's best for central banks to keep raising interest rates even if they lead us to a severe recession in the long run. Otherwise, inflation will continue to grow to a point where it can't be put under control. A good thing about Bitcoin is that it's deflationary by design. You cannot debase Bitcoin unlike traditional Fiat currencies.

If the world gradually begins accepting BTC as an alternative to Fiat (like how El Salvador has been doing lately), then banks will start losing traction until they become history. The odds of this happening are very slim, but who knows what changes will come in the future as we head into complete uncertainty? Just my thoughts

The step taken by the Bank in raising interest rates is to attract people to be more interested in saving their money in the bank. The government and the banks have printed too much money during the Covid pandemic. and this step was taken in an effort to make the economic movement or cycle in society continue in the midst of a pandemic. so that in various countries of course we are no strangers when the pandemic takes place the government continues to provide assistance in the form of money to its people. and it is effective because it keeps the economy in the community running well even during a pandemic.

However, the effect was only felt when the pandemic ended. that is inflation. Inflation occurs due to many factors. but one of the factors is because there are too many countries printing money that is circulated. and now the government is trying to dampen or overcome the problem by raising interest rates. with the hope that people will be more interested in saving money to the Bank than spending it. so that slowly the circulation of money can be reduced little by little. But actually raising interest rates also means the government must be prepared for the next effect, namely a recession. at least that's what i understand. maybe i'm wrong. because we as ordinary people certainly do not know what is really going on. however, what is clear is that inflation today is also influenced by other factors such as wars and even natural disasters.

Actually the increase of interest rate worked as we expected and most fiat currencies started to recover from the dive took since 2020 for the past few weeks but it affected the end user a lot so they created the circulation of money into the economy without making any changes which benefits the people.

No economic experts accepts bitcoin as an alternative and don't know how long they will take to accept it but already people realized what is best so they are investing more than before in all the assets so we may see a revolutionary change if the trend goes on for long period of time.

I think central banks will ultimately give up when they realize they can't keep inflation under control. We can blame the COVID-19 pandemic and the Russo-Ukraine war for this mess. Now all hell will break loose, as prices will continue to soar like there's no tomorrow. The poor will become poorer, while the rich will become richer. Bitcoin was created as a solution against banks' malpractices.

If only the world switched to the Bitcoin Standard, things would've improved for the better. After all, Bitcoin is a deflationary cryptocurrency that can't be debased by any government or central bank whatsoever. Some countries are gradually beginning to adopt BTC as legal tender, so only time will tell us if central banks (alongside Fiat) will cease to exist for good. Just my opinion

In my view there is not a perfect model for lowering Inflation as in centralized finance everything involves the interest until we get the alternative of interest system there is no way to support the deflationary model and i can see BTC somehow interest free mode of finance but whatever time knows better then ua what is happening or what is going to happen. Interest plays the main or lead role in ruining any model in centralized finance.

Inflation is already going down, hence they will not fail in their goals. I believe there isn't that much time left until we are going to see under 5% inflation again, it will soon happen, probably by the end of 2023 the inflation rate will be fine.

Recession is another topic though, that's going to happen, that's the nature of dropping inflation, it has to happen but that will pass eventually when the interest rates start to go down. First lets drop inflation, then we will stop recession eventually. That's why it's quite important to focus on this rather than focus on fixing it right away, just give it some time, it will be fixed in the long run for sure.

This is a vicious circle that cannot be stopped, it all starts with energy resources and this will affect every industry, everything should rise in price, and salaries, as always, are raised last, when the company sees that its financial volumes have grown, and now they can do it without prejudice to themself.

In fact, not many people invest, for most the salary is only enough to live on and save a little for unforeseen expenses. It is for such people that inflation is the most dangerous. Inflation will come down over time, as it always does when prices go up, but it will lower the standard of living for the poor. For some period, inflation will be relatively stable and not high, but then another crisis will come again and everything will happen again.

They don’t really have a choice. They will either let the inflation loose, or crash the markets while fighting it. There isn’t an easy way out of this. Whenever the central banks have to make a choice between high inflation and high interest rates, they always choose high inflation. People think the interest rates are high now… in reality they are at half of what they need to be. You can’t fight inflation that way. Nobody can. At some point Powell will tap out and start QE’ing again.

The FED's measures to tackle inflation have severely affected other countries' economies, especially when the world depends on the US Dollar as its reserve currency. It's been the most "hawikish" central bank so far. Considering that "The FED" wants to lower inflation back to 2%, we should expect more pain for the global economy.

Whenever the central banks' measures will fail or succeed, it's yet to be seen. The Russo-Ukraine war and the COVID-19 pandemic are still ongoing, so I fail to see how "The FED" and other central banks will be able to control inflation in the short term. Bitcoin was created as a solution against banks, so we'll see how this will play out in the long run. Just my thoughts

It depends whom you ask and the priorities of the government or the central bank.
There is no doubt about the important role consumption has in our capitalist systems, but when it is about the stability of a national currency it is necessary to de-accelerate a bit the economy for the sake of the system itself.

Look at it this way: if the interest rates were low during inflationary times, one of the possible consequences would be loss of trust of the currency and even to the bonds emitted by the government. The USA pays their debtors with USD and at defined interest.

If those interest become lower than the inflation rate, then nobody would have a reason to lean money to the Federal reserve, that would be a big problem, for example.

Inflation will never be completely suppressed by the central bank, but I think they can reduce inflation using several methods. Central banks do not demand that the government print more money to meet the criteria you mentioned, although they do have authority in this area. Each country has specific laws against the addition of printed money, certain conditions have gone through several basic factors for approval for additions. Money can never be printed according to the tastes of the central bank, because it will affect the exchange rate and cause the exchange rate to go down. The amount of money in circulation affects the exchange rate of foreign money, that's why the state cannot print as much money as possible to pay off debts.

On the other hand, adding to the minimum wage also cannot completely cut deplation or inflation. If the money in circulation cannot be controlled in a balanced way, inflation actually occurs due to continuous increases in the prices of goods and services which are unstable under certain conditions.

Raising wages when commodity prices rise is another mistake, and if governments and companies do so, it will cause inflation to accelerate and bring the national economy to a standstill. This is not the first time the world economy has fallen into inflation, inflation is also a cycle of the economy, and in the past, the government has also handled it well. I believe inflation will decrease but we need time, we cannot demand an end overnight. And for inflation to come down, the government has to make some sacrifices, and people like us are always their scapegoats. So when inflation hits, don't expect the government to save us but save yourself by doing more, investing in deflationary assets like bitcoin.

Understood, thanks for the explanation.

But isn't it bad for business, since people are consuming less, therefore retailers are making less profit and there is less money circulating among everyone's hands? Won't it lead companies to look abroad for countries with more encouraging consuming economical policies?

Isn't it better for the economy when people are acquiring goods frequently, so there is a constant flux of money circulating and feeding every parts involved on the process? And with accessible credit lines, it should be more profitable for banks to earn with quantity over quality.

When the Federal reserve or central banks increase the interest rate to decrease or de-accelerate inflation, they do not mean the interest they pay to the investors or the holder of national debt.

They mean interests of loans. Basically, what they do is to make loans more expensive for people and companies, so they cannot access money so easily to buy goods and services, this increases the demand for money and decreases the demand for goods.

For example, if you wanted to buy a new phone using credit, you would not do it if the interest of the credit is high, so you choose not to buy the phone. With less people buying and needing cash, the inflation goes slower.

If everyone had access to loans at 0% interest, all people would rush to apply for credit to buy all the want/can at the same time, increasing the demand for goods and increasing inflation.

I don't understand why this measure adopted by central banks reduce inflation, because what they do is to pay more money to investors through raised interest rates, what will consequently demand governments to print more money to fulfill with their obligations, resulting in more inflation and decreasement in purchasing power. As I see there is solution for the economy on these measures.

Or am I missing anything on this whole process?

In an ideal world where everyone plays by the rules this is what's going to happen. The reality is different, and a lot of players are not playing accordingly as they have to play for survival and not for the equilibrium in the economy. Those who have the means to buy and sell will have a rather easier time powering through rough bouts of inflation than those who do not, and that's where most complications set in. You also have the governments and companies not working together to increase wages as the price of goods and services increases. It will lead to a lot of ruin in the economy short-term and if there isn't anything that the governments and huge companies do to fix the situation, it will eventually lead to even worse inflation that is no longer signifying growth of the economy.

I don’t put my high hopes on that. Central banks have less chances to lower the inflation down since it’s a worldly effect and is experienced all over the world, and I don’t even think it can still be in controlled either. The only thing they can help the people is to increase the interest rate of our deposits as it can be profitable on the part of their clients. Either way, this inflation will stay for good but hopefully prices will not increase that much that average people will hardly afford it.

The FED had been doing a good job in my opinion, they managed to increase interest rates much faster than other central banks. It remains to be seen in 2023 how this going to continue, but I think that the FED will keep reacting faster to changes in inflation. Here in Europe the ECB is reacting much slower and seems to be more concerned about the financing rates of governments. Increasing interest rates means that every time government debt is being rolled over the interest rates will increase a lot. Printing new money to save countries with too much debt is not an option anymore. Overall I do think the central banks can bring down inflation with the tools they have. The question is which is going to be their target level for inflation.

I guess there's been too much harm to the global economy where there's no point for recovery. We'd have to accept a new reality where inflation is in the double digits. It was all caused by the COVID-19 pandemic and the Russia-Ukraine crisis. Central banks will eventually give up, leading us to the weakening of Fiat currencies around the world (as a result of inflation). An easier solution for the rising costs of goods and services would be to raise the salaries of workers. I know employers are too greedy to do this, but I believe they will change their mind as the world faces a new reality.

With the aforementioned catastrophes, Bitcoin is expected to rise bigger and stronger than ever. Just wait until central banks (like The FED) stop raising interest rates for BTC to go all the way to the moon. Who knows if many BTC holders will become rich soon? Just my opinion

Important distinction between the Ukrainian war related "inflation" and central bank induced inflation is that theoretically after the war reaches conclusion, you would expect prices of goods to go back down as the supply stabilizes. When the central banks begin messing with the money supply via interest rates or when the government decides to spend money it doesn't have, consumer demand artificially rises with the new circulating cash and it won't go down unless the cash is removed from the economy.

The war isn't as dangerous to the long term global economy as the COVID-19 spending frenzy was.

Not really, they don't need to drop the prices, people are somehow expecting prices to fall and I have no idea why, they just need to keep prices going up just a bit, or not at all, which is quite possible. As long as you give good high interest rates, people will use all that extra money to invest and that means there will be lack of money and that means people will keep the prices cheap to be able to sell because if they keep it high then nobody would buy it since their money is in interest.

As simple as that, it is literally a high school freshmen level mathematics and everyone should be aware of it, nothing complicated going on here.

Global recession was meant to happen in the early 20s even without the pandemic and without the war. During the pandemic, risky measures were actively introduced to basically postpone a recession. However, you can't cancel it, and the riskier money printing gets, the more chance there is of things getting out of hand. Russia's war against Ukraine certainly didn't help, given its impact on supply lines and energy prices. I do believe that there will eventually be economic recovery and growth, and that we're still far from the sort of global crisis that would push humanity to abandon the fiat model altogether, but IMO it will take several years to overcome what's only starting now (not stabilizing inflation because stompix is right it's already not so bad in many places, but growing global economy), and it will be a difficult period.

No they cannot do that.

I believe banks makes more from the increase and the high inflation around the world.
It's impossible to be expecting too much from banks when you equally know they are part of the problems involved with inflation how do they provide a solution ?

So, nobody is looking at the current numbers and the trend and commenting on how the government will fail and inflation will rampage for decades destroying the entire civilization in its path?

Some good news for every normal person, and some very bad news for every doom and gloom worshiper:
German inflation drops more than expected to 9.6%


Surprise French inflation drop adds to signs Europe prices are cooling
PARIS, Jan 4 (Reuters) - Inflation in France unexpectedly dropped well below 7% in December from a record high a month earlier, data showed on Wednesday, the latest sign that slowing energy price rises are helping Europe overcome the worst of the inflation crisis.

Spain's 12-month inflation slows down again in December to 5.8%

Of course, that's not happening in every country, in some, it just breaks record after record
Iran's Inflation Rate Topped 48% in December
but we're not talking about countries that were economical failures even before the war or covid!

I just wonder how much hate this good news will receive!

They better fail at it. This will make bitcoin look brighter option in terms of securing the value for it. Imagine bitcoin being the volatile asset still holds amazing value compare to what best assets and fiats out their. I dont know how bitcoin will be able to fight the inflation but with way it is holding valuation it is going to do miracles in the future. Central banks can only do one thing and that's by printing more and more money but that's out of nothing. The only energy they use is paper & some electricity. In fact they waste it anyways. So they will eventually fail, they will have to at least consider the crypto currencies to liquidate the market more.

actually the problem is not a pandemic, but the ongoing wars and geo-political tensions in many countries,, that's what increases inflation. moreover, countries are now very protective of their resources, this will make inflation worse .. and moreover there has been more and more speculation that will make recession even more real in the future and this will increase inflation in many countries and the role of the central bank alone will not be enough to overcome this problem

Let's admit that double digit inflation is here to stay. Most of the governments around the world are resorting to handing out freebies in exchange of votes, and the era of fiscal conservative policies is over. Here in India, there is a competition between different political parties to hand out the maximum number of freebies. But the problem is that tax revenue is constant and not growing. The only solution here is to print additional amounts of money, and this is resulting in higher inflation rates. And given the rate of printing money, I would expect the inflation rates to go up considerably in the next 4-5 years.

It can be said in simple terms that when you control the printing of money, then you will not worry about the inflation rate, because you can always print more. This approach to solving problems in the economy is initially doomed to failure, but this will not worry people who put their own interests above the interests of society in the first place.

The low-income strata of the population will always suffer from rising inflation, because for them the rise in prices for essential products will be very noticeable.

The world can't stand much pain for long. Ever since the COVID-19 pandemic emerged, things have been going south at a very fast pace. The Russia-Ukraine war have aggravated the situation. I think that's the reason why inflation won't go down easily. Central banks may try to keep raising interest rates, but if the war and the pandemic doesn't come to an end, they will ultimately fail in trying to lower down inflation for good.

I just hope things go back to normal soon, as poor people are becoming poorer over time. It would be totally unfair to see the rich becoming richer, while the poor gets left behind in the dust. Who knows what the future lies for the global economy? Just my thoughts

Russia's war in Ukraine will go on for about another six months, according to the most optimistic forecasts, and should end in Russia's defeat. It is already quite clear that Russia cannot win the war it started. But it can still drag on and this will really lead to a further aggravation of the economic situation in the world. In order for it to end quickly, it is necessary for the states to unite and force Russia to stop its aggression.
As for inflation, it is an important companion of the economy of states and plays both a negative and a positive role.

Of course, inflation is very difficult to cure and often recurs if money is not printed with the right rules and measures, but that does not mean it cannot be normalized.
Inflation is a natural thing if it occurs if it is within normal limits of 1-3% but it will be dangerous if it exceeds that presentation, this can be caused by a shortage of raw materials so that production cannot meet people's demand so that goods that people need become scarce in the market, that which caused a significant price increase. If the central bank plays a role only by relaxing the rules for making loans, it will be detrimental in my opinion. The problem here is not that there is no money, but that there is too much money in circulation and the circulation of commodity goods is limited, which causes prices to soar. Here what must play an important role is the government which can find supplies of commodity goods or substitute alternatives to fulfil market demand.
Maybe the central bank's discretion is to raise interest rates to reduce the circulation of money in society and stop printing money.

One of the parties causing the crisis cannot be a party to finding a solution. Central banks will not issue policies and steps that do not serve their personal interest.
Inflation is dealt with on a broad level by developing policies and procedures to limit its extent. Central banks are considered the main cause of this problem when they try to fill the deficit that they caused by devaluing the currency, and this is usually by printing more of it. Preventive measures are taken in light of a booming economy and not in a permanent reality to deal with crises .

Inflation is a difficult thing to cure, usually inflation will continue to occur and repeat, the central bank will try to increase the income of citizens by many roads, the central bank will provide convenience for loans to banks so as to make citizens can be helped and earn income that can cover inflation .

I wonder if both China and Russia will constitute what would be called a "New World Order"? The West seems to be showing signs of weakness, so I wouldn't be surprised if this happens within the not-so-distant future. If democracy loses, then authoritarianism will reign supreme over world countries. Some say the US will collapse, paving the way for autocratic countries (like the ones mentioned previously) to take over the world. If this happens, then we will be nothing but doomed.

We'll see how long countries will keep funding Ukraine as inflation continues to soar like there's no tomorrow. It's likely they will stop supporting Ukraine in the future as they head themselves towards a tough financial situation. Unless the conflict comes to an end, we can't expect the global economy to show signs of recovery anytime soon. The future is widely unpredictable, so we can only hope for the best. Just my thoughts

I don't think so. Maybe the banks can do something to help the issues in inflation but some governments do also their best to help. They know that it was mostly their role but I agree that government should help the agricultural industry so that more supplies of the food are going to be produce and their prices won't rise anymore.

Other than the food, another driver of the inflation can be the oil. Many times when the price of the oil rise, other goods do also follow. Maybe the government can also do something to help increase the production of the oil's but whenever there is a sanction, this can still cause an issue. This is hard to avoid.

It is the shift of power from West to East, it is described as giving birth. It is hard and painful and it also takes time but the end result is beautiful. This is also why the effects in the West are more severe than the effects in the East. Right now any politicians in the seats of power that have accepted the New World Order is putting their country in alignment with that new Order. Others that don't accept it are resisting or denying it altogether while they experience increasing number of crisis.

For example UK is facing a cost of living crisis with mass protests and strikes every day that has reached their rail workers halting the public transport. This is on top of electricity blackouts and water cut offs in different parts of the country like Manchester, Northumberland, Farington, ... that the English are facing.

The governments all over the world rely on central banks to control inflation which is constitutional role of the bank in many countries and government can't interfere in it. Central banks usually control it by money tightening or softening policy which usually works but you are also right that that governments on their part should play their role by increasing agricultural (food price is an important component of inflation calculation) & industrial product which can equally work to bring down inflation.

Well that sucks. If that is the case, governments would be "deadlocked" in their efforts to help restore the economy back to its former glory. Unless the war between Russia and Ukraine ends, I don't think things will improve anytime soon. Sooner or later, this will be all over as wars don't last forever. We're yet to see whenever the pandemic will disappear in the distant future or be with us forever. Everything will depend on governments' collaborative efforts to help put an end to all of this mess for good.

I just hope world countries don't end up like Venezuela with a hyperinflation that makes it impossible for poor people to acquire life necessities. It will be complete chaos if this happens, greatly establishing a fine line between the wealthy and the poor. The future is widely uncertain right now, so we can only hope for the best. Just my thoughts

It is impossible to ditch fossil fuels for good because energy is not their own usage. From your mouse and keyboard that are made from oil products to fertilizers that use gas and gas products need fossil fuels.

As for nuclear energy, the problem is that the technology is in the hands of a small number of countries, and they have to build nuclear facilities for 90% of the world (they will not allow you to have the technology at any cost either). On top of that the nuclear fuel is also in the hands of a small number of countries (like Russia!) which means switching to nuclear energy comes with the same dependence as fossil fuels.

Governments are going to need to ramp up production in order to curb down inflation for good. Raising interest rates is not enough to fix the economy, especially when the COVID-19 pandemic and the Russo-Ukraine war are disrupting the global supply chain. Countries are going to need to become self-sufficient by relying on alternative energy sources (nuclear energy?) and ditching oil for good. Once that happens, things could go back to normal. The EU already talked about solving the energy crisis caused by Russia, so it's likely inflation will ease in the region within the long term. I'm yet to see what the US will do with its dependence on oil by OPEC countries.

If everyone worked together, there would be hopes of seeing a brighter future. Let's see if central banks' efforts to tackle inflation will materialize during the course of 2023. Just my thoughts

Sometimes the government relies too much on the central bank to overcome inflation, in my opinion this is a mistake, without increased production, inflation will continue to occur, and it is proven that many central banks fail to overcome inflation so as to make the economy chaotic.

We are seeing it clear that unemployment rate is on the increasing side and I still get to wonder how people will be surviving without jobs and government not providing jobs. CPI work with capital and no capital is meaning no investment and no job can be created in all this circle working this way we are still going far in this economic downturn.

From what I can see the rising rates has maybe a very small effect. I see that the CPI is much lower than before however everything is still very expensive. Grocery prices still keep going higher and higher.

The nail on the coffin will be if the employment numbers show some slowdown meaning that unemployment has bottomed and will go up. Right now we got a bad labor shortage and it’s causing this inflation to worsen. This week we get the CPI numbers and we will see how they go.

What surprised me is that there was not much inflation until a year ago, which is when it started to be noticed, despite the expansionary policy of the central banks. In reality what happened before, like after March 2020, is that inflation went to financial assets rather than consumer goods.

Bringing down inflation in goods and services will depend on a number of things, not least lower energy prices, but even if it is achieved, I do not see central banks reducing their balance sheet indefinitely. As soon as they can, they will start printing again, and hopefully the effect of this will be that the extra money will push up prices of financial assets such as bitcoin, rather than goods and services.

That's certainly true, mate. Unless COVID-19 and the Russo-Ukraine war go away, we can't expect inflation to ease anytime soon. Governments are going to need to work together to put an end to the war for the good of the economy. I'm wondering if prolonging the war is a plan for governments to go full-speed ahead for a global reset. Effectively, the rich have become richer, while the poor, poorer. Let's see how long will it take for inflation rates to lower down to an acceptable rate. It's a widely unpredictable world we're living into, so we can only hope for the best. Who knows what the future holds for the global economy? Just my thoughts

These things are the catalysts not the reason. The real reason is printing money which is the easiest way incompetent economists use to blow some life in a dying economy. For example if they hadn't printed so much money during the COVID19 pandemic we wouldn't have seen such high inflation rates. Same with these days that they are constantly printing more money in 6 months to a year from now we will see much higher inflation rates not because of whatever conflict will be happening then (like Taiwan-China or continuation of NATO-Russia conflicts) but because of this money printing today.

They are both impossible in our lifetimes. They are too desperate for fossil fuels that they are trying to buy any amount of it from literary anywhere! Just recently US removed some sanctions on Venezuela so that they may be able to buy some oil and oil products!

The problem is that they want to reduce it at ANY COST. This is why they keep increasing interest rate which can only work a little and only to a certain percentage. It has already failed since both inflation and interest rates are high (7-8% vs 4%).
Unless they can decrease oil prices magically to <$40 there is no way to save the economy in near future. Specially when inflation and recession creates a worse crisis than 2008 soon.

Yeah, it's starting to be stable for now and the effect will gradually come to the economy of all the countries. Those top leaders can pressure them to push for more supply so that the prices will go down and it will be a domino effect.

Well, I don't know much about OPEC but if there's a world elite that holds and controls it, they won't be pressured to any command by a world leader.

Printing of more money during the height of the pandemic is also one factor. It's a consolidation of many factors but having that high price with oil is also one of the major reasons.

Well, as it become stable these days, oligarchs are still pushing for limitation of the supply so that they can still capitalize the situation for the other countries.

Good comparison, when oil goes up then everything goes up. The same with btc and alts, when btc goes up, most alts are going up too.

I don't think they will fail and the reason is central banks are not independent of individual government and so their decisions and regulations are government policies. Interest rate is not only what reduces inflation, the government also has role to play like increase productivity and exportation will also help to stabilize the economy, increase GDP. Increase productivity is the direct role of government, production will reduce scarcity,  as a result of this inflation will be reduced.


There is solution but not to the extent that things will go back to the way they were before the war and covid-19. Before then wheat production was cheaper and it gets across to countries that are in need easily and we understand how oil price have also skyrocketed now, these won't be the same anymore.

Currently the only barrier that is standing between world getting crumbled upon itself in terms of economic crisis and doomsday preparation is current Money reserve of every country! Once they start to exhaust and once government is no longer on the possession of real money circulation things gonna go out of hands. For now countries like USA, Europe are trying to show that they are completely fine but they are not. All they are doing is showing us unrealistic values. They don’t have money, they have virtual back ups and bonds and nothing else. If employment is going down then taxes will go down and money circulation will halt even further. Central will have no option but to declare long lasting economic crisis.

Many thinks they are the primary cause of it because banks supplies money and more money means more inflation but I think you are right that there would still be other factors that are involved here. Still, banks can help by not producing more money and let the government or the people find some alternative remedies, I am sure there are some available out there.

It seems that the oil is like a btc, because oil also controls the price of other goods while btc is known to control the price of other cryptos. Producing more oil not only helps lowering the effects of the inflation but also the recession because it will force oil companies to hire more people to speed up the process.

Actually they will be able to do it right because they also did in the past and they have always managed to escalate the situation towards right road. In fact I could not imagine world getting into negative trends for very long terms. It will impact the lives of common peeps like me and it would be hard to sustain a good lifestyle for very long. Obviously every bit of action by government and central banks will impact us so they must recover the world from such down trend. Whether they use high taxes for time being and try to get it in-line or whether they use other ways (like bitcoin) but they should do it.

Central bank can not bring down or reduce inflation because the world economy is been ravaged by two major factors which can bring down the economy of any country. The Covid-19 has done a lot of damage to our economy, the world hasn't even recovered from that damage before the war came in to worsten the whole thing.

For the decline of inflation to be achieved, so many challenges that the world economy is facing should be tackled,there should make way to create peace in the ongoing war by dialogue with both countries involved instead of sponsoring or assisting the continuation of the war. Nobody knows for how long this war will last and it  will do more damage to the world economy and more inflation will be experienced because they are all focused on winning the war and not considering the damage it is doing to the world at large.

Its not really inevitable though as steps to slow things down or stop inflation from happening completely could have been made before inflation rise but nah we always have to deal with it then banks will put up counter measurement to the inflation after its effect has been 'damaging' atleast so people are totally used to inflation as part of economic cycle by now

Indeed, it is a biggest factor behind skyrocketing of inflation all over the world but the price of crude oil are more or less stable around $80 which is good news but it should gradual come down to Pres-Ukraine level to see a meaningful impact on inflation. OPEC can play an important role by increasing supply but question arises why they will do it, they are making good profit in the current market situation.

Inflation is an inevitable companion of the economies of states and it has both positive and negative sides. We see that the global economy is falling, and inflation is growing for objective reasons, including the damage from the coronavirus pandemic and the fight against it, as well as the war between Russia and Ukraine, which led to a violation of the supply chains of petroleum products and agricultural products, and also led to the application of international sanctions, which in any case have a two-way effect.
States will never be able to overcome inflation, because it is also necessary, because it helps in the redistribution of production and human resources.

Well there's still the issue of the Russo-Ukraine war and the COVID-19 pandemic. How will central banks control inflation when there are large disruptions in the global supply chain? Not to mention, geopolitical tensions are on the rise. If they want to "fix" the economy, governments need to deal with the aforementioned issues first. Unless the EU becomes energy-independent and the US abandons fossil fuels for good, we won't be going anywhere soon.

There needs to be a collaborative effort from all sides to help beat down inflation for good. While I admit inflation won't disappear completely, it's possible to reduce it to a point where it doesn't affect poor people. The US is aiming for a 2% inflation rate, so we're going to have to see if that will work out in the long run. Maybe 2024 will turn out to be a bright year for the global economy? Just my opinion

once FED pivots, this will go run wild again while they send stimulus money. it becomes a cycle, after stimulus, they will again raise interest rate.

how long can they hold down the inflation because this is already a runaway inflation when you see news the banks are already not allowing people to withdraw.

That’s the thing, people do not realize that what gone up, and caused the inflation, doesn't need to go up and stay high and still cause the inflation to drop. Like for example a carton of milk can go from 1 dollar to 4 dollars, that’s 4x inflation and terrible right? But, next year if it goes from 4 dollars to 5 dollars that’s only 25%, and the year after that if it goes from 5 to 5.05 that’s only 1%.

Now, in 3 years it went from 1 to 5.05, but the inflation is 1% for the last one. That’s the key here, it will still be all things very high in price for sure, there is no doubt about that but the inflation will not keep on growing bigger and bigger, it will look like it’s going down.

Yeah, in your world maybe, in reality, WTI is at $78 and Brent at $85, as usual!


It's 1.5% in the EU, but don't let details like numbers stand in your way.


"Biggest economist" ?


Don't you dare be optimistic about something, read the mood of the room, we're all doomed!
Actually, that rhymes!  

But it's indeed funny.
In the previous topic, I read everyone was looking at the new generation as people who can't overcome a challenge, who are dependent on their smartphones, the generation that will crumble under an ounce of stress, and look what we have here, almost everyone saying the world is done for, that nothing better will come, that we live in a matrix where we're just at the mercy of the ones controlling it and so on, I can't make head and tails of what's happening here.
On one side we promote independence how the new system will change things, and how problems will be fixed, on the other side, nothing you can do, just crawl under your bed and swipe for the bad news. If the economy recovers and we see inflation back to 1-2%, lower unemployment, and the war will be over I think we need to start having some counseling topics to prevent a few users to commit suicide as they will have a total breakdown seeing another apocalypse failing.

They have already failed.

Increasing interest rates can only succeed if they can actually reduce inflation by reducing the energy cost. If you look at most of the previous times they manipulated the market by working with interest rate, they followed that up by decreasing fossil fuel prices like oil. However, this time not only they failed to have any major effects on oil price (it is still above $90 and eyeing $100+) but also the gas price is still very high.

The interest rate is already 4-5% in US and EU and it is at the highest amount it can be. Any further rise won't have any effects as the previous time FED increased the rates it didn't have the effects they hoped for. So now it is causing recession instead while energy prices are still high.

Lowering the inflation rate and its impact will not fully rely on the central banks decisions. There has to be some tie with the economic factors like asking the OPEC to produce more supply of oil.

That's one of the biggest factor that they have to consider to lower the impact of the inflation. Because when oil increases, everything goes up and it's a major ingredient for an economy to fall and have more expensive goods and services due to high price of oil.

Central bank's are often portrayed as some sort of super intelligent and insightful organizations that can somehow prepare for future problems. However as we saw with the financial crisis in 2008 and how inflation has overwhelmed them, they are often merely reacting to events or sometimes even cause them through poor regulatory controls. Be careful where you put your faith as it can be an illusion to keep the masses pacified.

I think it generally takes something like 18 months for the effects of raising interest rates
to take full effect in the goal of reducing inflation.

It's the boom to bust tactics which works for increasing and reducing inflation. Central
banks are raising interest rates in various increments, when the they cripple a lot of
people and recession takes hold and inflation drops they will start reducing interest rates
to stimulate growth and the cycle starts again.

So no central banks will not fail.

I think the main reason behind inflation rise was printing of money in huge amounts during the covid-19 period. Every government did it to keep their economy running which was the right step in given situation at that time, but it caused huge increase in money in circulation. FED has taken the right step by increasing interest rate (many times during the year) to reduce money supply which is producing desired results. Ukraine war (which is a madness and should be stopped before it spreads to whole Europe) also contributed to the rise in price of food & energy because supply was disrupted. I am optimistic that inflation will gradually come down becuase food and energy prices are stabilizing now.

1.Do you have a crystal ball or something? Even the biggest economists in the world don't predict inflation under 3%.
2.The USD "keeps crushing the pound and the euro only because the Federal Reserve increased the interest rates higher than the British central bank or the European central bank. The war in Ukraine and the natural gas shortage in Europe also plays a role.
The only thing that can stop the inflation is the recession. The central banks have to be really careful with their policies.
They have to keep the balance between lowering the inflation and supporting the economy in times of a recession. Those two goals kinda contradict themselves. I'm not an optimist for 2023 and 2024. Maybe after 2025 things will get better.

Central banks will do their job as always, and inflation and recession will do their job, the price is paid by all of us who support politics and its actions in one way or another. What is important to know is that the consequences of the pandemic are still coming to fruition, and that the consequences of the war will only come to fruition in the years to come.

Although some perceive it as a war between Russia and Ukraine, it is much more than that, considering who is behind Ukraine and who is behind Russia - so it is actually a limited version of a world war in which everyone participates but in a limited area. How long it will last depends on whether at some point Russia will admit defeat and retreat to the positions before the aggression, or whether Ukraine will achieve a military victory with Western military and financial aid.

The world economy will recover, but it is only a question of when it will fall into some new problems again - because decades of poor management of resources and destruction of the environment will not bring us a peaceful and prosperous future.

Yes: Currency devaluation is worse than inflation like it happened many developing countries after Ukraine war broke out and price of food & crude oil skyrocketed due to disruption in supply chain. The worst hit country was Srilanka where foreign exchanged reserves were totally diminished and no dollars were left in their central bank to pay their import bills. The Ukraine war is the mother of all economics crisis, it should come to an end now.

We seem to have no choice but to raise rates, but I believe inflation will eventually fall to a manageable level. As announced yesterday, the Fed has said that the rate hike has brought down inflation and it is intending to start reducing future rate hikes for the economy to recover. This is not the first time the economy has gone through a crisis and in the past, we have always recovered and boomed afterward. Maybe this time as you say we are in worse situation but by no means there is no solution, I believe everything will start to stabilize in 2024

Inflation will normalize if the currency hasn't completely collapsed as long as there isn't an increase in spending or money supply. You'll just have to pay higher prices for goods than you did in the past. Central banks will be successful but that isn't really the point. The point is that there's a systematic process by the banks and government to keep inflation at 1-2% yearly in order to promote currency usage and there isn't even a guarantee that the banks can hit this target. If the government decides to print more money, it's their prerogative without advisory from the citizens.

Citizens get their purchasing power reduced, and there isn't anything they can do about it even after inflation is stabilized.

You said it right, the CPI is already coming down which reflects that interest rate increase is working. Beside interest rates increase governments should also increase sale/purchase of government securities through open market operations to further reduce money supply but if cost push factors are the cause rise in inflation then money tightening policy will not produce targeted results.

The market crowd are the most prolific forecasters and the Government has printed a lot of money to keep interest rates from rising. They benefit from low rates for a while, but when they stop working, it can get complicated. Plus, consumer goods are getting more expensive, fuel costs are going up and taxes are going up. I don't think central banks can free people forever.

I am 100% percent sure that inflation will drop way down under 3%.

Just not sure when.

Also not sure how long USD can keep crushing the Pound and the Euro

the pound has rallied back a lot against the dollar. 1.07 to 1.21

the euro rallied a bit .96 to 1.04

these ratios are key to how long the US Fed can rise rates.

From where I am, raising interest rates is certainly not enough. The rising prices of goods and services here are multi-faceted. Although the invasion in Europe, the rising USD, the disruptions in the global supply chain, as well as the effects of the pandemic have contributed a lot to it, there is also the domestic failure to implement appropriate policies, develop timely programs, provide sufficient financial support, and other measures that could have significantly reduced the impacts of global concerns.  

I think such an increase in interest rates will help control inflation. Surely such financial institutions have to be careful if they raise interest rates too high because even those with money can't just sit idly by as they watch their investments, especially in the stock market, slowly being drained away.

We do need a global economic recovery. Most countries are in debt, and their economies have been brought to their knees. Major developed countries must implement policies that stimulate domestic demand to attract these economies back. I don't think war should be anyone's first choice; it's expensive, dangerous, and ultimately ineffective at solving problems.

War and pandemics are indeed factors of great concern that must be considered. It will be difficult to predict inflation if things get worse in the future. Well, they probably have some serious thoughts to do, though. My view is that the central bank wants to see price stability. They will use any tool at their disposal to achieve that goal. But what happens when their actions help create a massive asset bubble instead?

The world of finance is very fragile, its main enemy is rush money caused by panic. We can all just wait and see what happens next.

I would not expect negative trends to reverse. The massive number of layoffs in the united states tech industry alone should be enough to guarantee a downturn. When inflation, high fossil prices, supply chain disruptions and other issues are sprinkled on top. Its like throwing gasoline on a fire. The fire will not be extinguished under those circumstances.

A good question could be whether people will cease and desist in supporting things that elevate inflation higher. Its common for me to see those who claim they want a reduction on inflation. Who continue to support everything guaranteeing inflation trends higher. Will people stop supporting economic policy that leads to high inflation? Will they stop voting for candidates who make pro inflationary political promises? Its difficult for inflation to decline, when people continue to support everything that leads in the opposite direction.

Central banks have taken a hawkish stance against inflation by raising interest rates at a constant rate. Their goal is to reduce the negative effects of both the COVID-19 pandemic and the Russo-Ukraine war on the global economy. While history has shown us that rising interest rates reduces inflation over time, this time is different. There are huge disruptions in the global supply chain and geopolitical tensions are rising at a fast pace. We can't expect inflation to lower down based on rate hikes alone. If the war prolongs to a very long time, I can't imagine how successful central banks will be in trying to tackle inflation for good.

Do you think such financial entities will fail in their goal of lowering down inflation? If not, why? Is there still hope for a global economic recovery when the war and the pandemic are at play? Your input will be greatly appreciated. Thanks.