Dhe devaluation of money does not pause. The latest inflation rates of 10.1 percent in the UK and 9.9 percent in the euro zone reinforce the bleak picture of economies where stubborn inflation is combined with economic weakness.
A rapid return to the two percent target set by many central banks does not seem realistic. This experience, however, is not new; Even in earlier phases of inflation, the devaluation of the currency could not simply be driven away by magic.
The central banks are unlikely to be able to avoid taking further significant interest rate hikes to combat inflation.
This is particularly true for the Bank of England and the European Central Bank, as weakness in the pound and the euro favors inflation imports.
Monetary policy works all the better against currency devaluation the fewer governments and collective bargaining parties make life difficult for it. An expansive financial policy and excessive wage settlements would be extremely counterproductive.