Commentary
International organizations such as International Monetary Fund (IMF), World Bank (WB), and Organization for Economic Co-operation and Development (OCED) have revised upward their economic forecasts in turn. Were their forecast updates correct, this would mean the global tightening is not strong enough, and probably not enough to bring down inflation to the 2 percent target. Data show this is indeed the case. Most countries, including United States, nations within the eurozone, the United Kingdom, and Australia are having their core inflation rates stayed flat (and high) over the past three to six quarters.
The theoretical basis of suppressing inflation by tightening is via the demand channel. Recently there are central bank research pieces attributing inflation to supply shocks. No doubt there were two to three years ago, but certainly not by now. This line of reasoning can hardly explain the flat inflation trend over the past year or so. And if this had been the case, central banks should not have tightened in the first place because monetary tools cannot solve any supply problem. Their deeds (tightening) have indeed refuted their words (research)….