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Goodbye Central-Bank Independence, Hello Inflation: Macro View

By Simon White, Bloomberg Markets Live Commentator and Reporter

 “There have been three great inventions since the beginning of time,” observed the economist Will Rogers: “Fire, the wheel and central banking.”

We should insert “independent” before the last of these, for it is autonomous central banks that have presided over the developed world’s low-inflation regime for the last 30 years. Yet as governments begin to re-assert their influence over monetary policy, this will be an increasing source of inflation and market instability. The prospect of returning to a low-inflation regime any time soon is diminishing rapidly.

The differing experience of the UK and the US in the 1970s illustrates this. The US receives much of the attention, but it was the UK that suffered the highest and most persistent inflation of the major developed economies in that decade.


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