Aurelia Butler

In the early dawn of this column’s existence, I wrote about an argument US economic historian Brad DeLong made for why we should expect government spending to be higher in the 21st century than in the 20th. DeLong’s 2015 thesis was that the structural changes in advanced economies meant more of their resources would have to go to things that are state responsibilities (health because of ageing, education because of the knowledge economy), or have significant “externality” or spillover effects that markets don’t handle efficiently (information, climate change). Those responsibilities have only become more pressing. Since 2020 we can add to them defence spending and the need for economic resilience — even at the price of some duplication or inefficiency — in the face of security threats or large disruptions of supply chains. The thesis that the state footprint in the economy will be permanently greater has held up well. But it is not at all clear that the political and economic policymaking system has taken this fully in.Take a moment to contemplate the likely scale of change we are talking about. Just the physical investment required to decarbonise the economy is enormous. Nobody seriously disputes the order of magnitude called for by the International Energy Agency: about $3tn in additional annual clean energy investments globally, nearly 3 per cent of the world’s gross domestic product. Not all of this has to be done through government budgets, of course. Indeed most will and should consist of private investment. But governments are responsible for making that happen. If they can crowd in six euros of new private investment for every euro they put in in incentives or investment of their own, they would still need to raise public spending by 0.5 per cent of GDP.To appreciate how big a change that is, consider that it would amount to a doubling (or more) of many countries’ recent net public investment rates, and that Joe Biden’s Inflation Reduction Act targets a mere 0.15 per cent of GDP worth of spending. And that is only decarbonisation. If you count on your fingers all the other new imperatives of greater public spending, you may quickly run out of hands. There is an “irresistible force meets immovable object” phenomenon here. For the logic of a bigger state footprint in the economy runs into the question of where the money will come from. Wherever you look, the political pressure to contain rather than expand public budgets is strong: from the battle to reform EU fiscal rules to US debt ceiling stand-offs. And policymakers everywhere have begun to look over their shoulders at what bond markets will tolerate, now that interest rates have taken off from their long rest around zero.This clash could be resolved in one of two ways. One is that the immovable object wins: political inertia will prove too strong and the policy needs for more spending will be jettisoned regardless of their merit. But the opposite possibility — that the irresistible force prevails — is more intriguing. Then we have barely seen the beginning of an imminent radical shift in state spending, and soon enough, the amounts governments have put on the table in the Inflation Reduction Act or the EU’s Recovery and Resilience Facility could look miserly rather than profligate. A straw in the wind here is the British Labour party, likely to form the next UK government. It has promised to spend £28bn per year on green investments, or about 1.1 per cent of GDP. Relative to economic size, that is more than seven times more than the IRA, and nearly twice as big as the RRF. We should mentally prepare ourselves for a world where fiscal commitments of that size are the rule and not the exception.That means thinking about how to pay for it, and how to manage the political ructions paying for it will cause. For the arithmetic is merciless: borrow more, spend less on something else, or increase tax revenues.What is the room for tax increases? That is going to vary a lot from one country to the next. In the US, the combined levels of government take in 33 per cent of GDP in revenue, which leaves a lot of room for tax increases. Not so much in France, which already takes in 20 percentage points more. There are creative ways of funding higher spending: witness Denmark’s choice to eliminate a public holiday to fund more defence. Still, high-tax countries will have to look at cutting other expenditures. One might think this contradicts the starting point that governments have to spend and invest more. But actual government spending on investment and services are only part of their budgets. A big source of variation in the budget-to-GDP ratio reflects different levels of transfers, redistribution of cash between different groups of citizens. Countries with high levels of transfers should consider more targeted or less generous transfer payments to leave room for more outright spending.Since either taxing someone more or giving them less is politically painful, the temptation will be to borrow more and fund increased spending through deficits. The challenge there is, of course, fiscal sustainability. The best time to have done massive deficit-funded investments was in the decade when interests were around zero. Those who then opposed more spending when debt service costs were tiny should be careful about using high interest costs as an argument for fiscal restraint today. But we are where we are and getting the investments we need will be harder with interest rates higher. That does not mean all new spending ought to be tax-funded. While that makes sense for permanent spending (such as health), big physical investment projects (such as for decarbonising our energy systems) should have their costs smoothed out over many decades. So we should expect a mix of tax- and deficit-funding at the scale of the new spending necessary.If this is where we are headed, there are some chunky implications for the craft of fiscal policymaking and for the statecraft of fiscal politics.First, the reward for smarter tax and spending structures will be greater. Governments that clean up old tax and expenditure structures, to make taxation more efficient and spending more growth-friendly, may avoid some of the political pain involved in shifting the economies’ resources towards new demands.Second, political conflicts over budgets and over debt and deficit management will get worse. That is because the stakes are bigger when larger resources have to be reallocated. Third, inflation surprises will no longer be all bad news — at least not for governments. They can create windfalls for public budgets since they amount to an unexpected tax and reduce real debt burdens — and frustration for households or businesses for the same reason.And fourth, tensions between fiscal and monetary policymakers will increase. The former benefit from higher inflation and lower interest rates; the latter are expected to lower inflation by raising rates. These tensions are already simmering. As governments commit to their implicit new spending objectives in earnest, expect them to come to a head — and expect the pressures to grow for a new arrangement for the fiscal-monetary division of labour.Other readablesWhat role will hydrogen play in cutting carbon emissions? Check out the FT’s new series.Next week’s Ukraine Recovery Conference provides an ideal opportunity to set Ukraine on a permanent path to transparency, probity and prosperity, writes Fergus Drake.Noah Smith argues that it’s a fool’s game to forecast which AI technologies will cost workers their jobs and which will benefit them by making them more productive. A better policy than “steering” technological development is to make our institutions robust to whatever changes are coming.Numbers newsThe Federal Reserve paused its monetary tightening cycle this week — but now expects more interest rate rises will be needed than it did before. Robert Armstrong and Ethan Wu think Fed chair Jay Powell may have converted (back?) to the view that most of the inflation reflects temporary supply-side shocks rather than overheating labour markets. More

Good morning. Sometimes the market reaction to Federal Reserve press conferences is fun, and sometimes it is boring. Yesterday, it was boring. Stocks shrugged, as did most of the bond market. The main excitement came in the policy-sensitive two-year yield, which zigzagged for a bit, but even that only finished up 5bp. More on what was actually said below. Email us: [email protected] and [email protected]. The FedWe’ve written several times now that inflation has hit an inflection point and is on the decline. It is nice to know that Fed chair Jay Powell agrees. Here he is at yesterday’s press conference, after the Fed declined to raise rates at this meeting:With goods we need to see continued healing in supply-side conditions. They’ve improved . . . In terms of housing services inflation, that’s another big piece. And you are seeing there that new rents, new leases are coming in at low levels . . . That leaves the big sector, which is more than half of the core PCE inflation. That’s non-housing services. And we see only the earliest signs of disinflation . . . Many analysts would say the key to getting inflation down there is to have a continuing loosening in labour market conditions, which we have seen . . . I would almost say that the conditions that we need to see in place to get inflation down are coming into place.All the pieces may be in place, but Powell had the good sense to admit that the rate at which inflation will fall is unknown:. . . interest sensitive spending is affected quickly [by policy] — housing, durable goods, things like that. But broader demand and spending and asset values take longer. And you can pretty much find research to support whatever answer you would like on that. So there’s not any certainty or agreement in the profession on how long it [disinflation] takesThis admirable piece of realism is, of course, an uneasy fit with the fact that every few months the Fed provides what appear to be fine-grained projections for key economic policies. When you don’t know how fast inflation is going to fall, guessing what the fed funds rate is going to be in six months is hard. This is why the Fed’s policy and its projections are often an odd fit. For example, the median Fed projection for core PCE inflation for year-end 2023 is 3.9 per cent. But if that turns out to be true, the decision not to increase rates yesterday was a mistake. This sort of inconsistency rankles the commentariat.But it’s better to think of the Fed’s economic projections as a gestalt image, rather than precisely calibrated estimates. So what is the image? The Fed now thinks that, in the near term, growth and inflation will be higher, and unemployment lower, than it thought a few months ago. So policy is going to be tighter for longer, and therefore, in the medium term, growth will be a bit lower. The decision to pause looks odd in the context of this image but, charitably interpreted, it allows for some error in an uncertain moment. While the Fed is broadly endorsing a tighter policy path, there seems to have been an important shift over the past few meetings. For months, Powell has framed labour market strength as a problem to be solved, because it was the main driver of non-housing services inflation. Yet at the May meeting, he said that “I do not think that wages are the principal driver of inflation”. And yesterday, he emphasised how the “remarkable” performance of the labour market was a support to growth rather than an inflation risk:The labour market I think has surprised many if not all analysts over the last couple of years with its extraordinary resilience, really. And it’s just remarkable. And that’s really, if you think about it, that’s what’s driving it. It’s job creation, it’s wages moving up, it’s supporting spending, which in turn is supporting hiring and it’s really the engine that is driving the economy.Highlighting the positive aspects of the tight labour market suggests a Fed that is not monomaniacally focused on increasing unemployment, as some critics allege it is. There’s a plain enough empirical reason for this shift in attitude: in the past year headline inflation has halved while unemployment has stayed very low. The Phillips curve, the classic economics model suggesting a sharp inflation-unemployment trade-off, hasn’t applied recently.Powell’s conversion to a less stringent view of the Phillips curve appears incomplete, however. Yesterday — in the first quote above — Powell reverted to his old position, saying that the key to bringing down services inflation was “continuing loosening in labour market conditions”.One questioner, Chris Rugaber of the Associated Press, put his finger on the tension between the old Powell and the new Powell. The response was equivocal:[Goods-driven inflation in 2021] wasn’t really particularly about the labour market or wages. As you moved into ‘22 and ‘23, many analysts believe that it will be important — an important part of getting inflation down, especially in the nonhousing services sector, to getting wage inflation back to a level that is sustainable . . . We actually have seen wages broadly move down, but just at a quite gradual pace. That’s a little bit of the finding of the Bernanke paper of a few weeks agoThat last line is a reference to the May paper by Ben Bernanke and Olivier Blanchard, which Unhedged has written about. It found that while inflation began with a Covid-19 pandemic shock to goods markets, high wage growth has helped sustain inflation. Bernanke and Blanchard conclude: Our decomposition shows that, as of early 2023, tight labour market conditions still accounted for a minority share of excess inflation. But according to our analysis, that share is likely to grow and will not subside on its own. The portion of inflation which traces its origin to overheating of labour markets can only be reversed by policy actions that bring labour demand and supply into better balance.The takeaway is that the labour market is not the only meaningful target for inflation-fighting policy. If a tight labour market is only a minority contributor to the inflation problem, it suggests we won’t need years of recessionary unemployment levels to get the job done. As Employ America’s Skanda Amarnath put it, “Powell now believes that a resilient labour market is an asset to achieving a soft landing, rather than a hindrance.” This may be overstating Powell’s conversion, but signs of intellectual openness about the workings of inflation can only be good news for investors. It reduces the chance of overtightening.Of course, Powell has said all along that he hoped inflation could be brought down without a big increase in unemployment (and as such a recession). But old Powell’s beliefs about the role of the labour market in services inflation left little room for this possibility. New Powell’s attitude allows for it. (Armstrong & Wu)One good readBranko Milanovic on global inequality. More

Longshoremen and a group representing US west coast port employers have reached a tentative contract agreement, averting a potential strike that businesses feared could cost the US economy $1bn a day.The deal comes after 13 months of contentious negotiations. US president Joe Biden this week sent his acting labour secretary, Julie Su, to push for an agreement following sporadic work stoppages that had slowed cargo movement at ports from Seattle to Los Angeles.The tentative, six-year contract agreement reached on Wednesday covers 22,000 workers and 29 west coast ports.In a statement, Su said the preliminary deal “delivers important stability for workers, for employers and for our country’s supply chain”.The deal marks the Biden administration’s second intervention to keep cargo flowing at ports on the US west coast. In late 2021, the president was forced to address bottlenecks at the twin ports of Los Angeles and Long Beach that were a main contributor to US supply chain disruptions.Biden, who campaigned on his pro-labour stance and is running for re-election in 2024, stepped in to avert a standstill at the ports that could have set back progress in reducing inflation.The negotiations had been marked by increasingly heated exchanges. On Monday, the Pacific Maritime Association, which represents shippers and terminals, accused the International Longshore and Warehouse Union, which represents dock workers, of having staged “disruptive actions” that diverged from its public statements.The ILWU, in turn, accused the port operators of manipulating media coverage of the disruptions to influence the negotiations.Gene Seroka, executive director of the Port of Los Angeles, said the tentative agreement “brings the stability and confidence that customers have been seeking”. In a joint statement, Pacific Maritime Association president James McKenna and ILWU chief Willie Adams praised the deal, adding: “We are also pleased to turn our full attention back to the operation of the West Coast Ports.”Importers had been braced for shortages and higher prices as the dispute escalated, with agricultural exporters expected to be among the first to be hit.Delays had also forced beef shippers to freeze raw products that were supposed to be delivered chilled, reducing their profits by as much as 80 per cent and damaging relationships with Asian buyers, said Peter Friedmann, executive director of the Agriculture Transportation Coalition, a trade group that represents shippers.

The labour dispute had threatened to disrupt the busy shipping period as retailers prepared to stock up for the holiday season. Many were already at historically low inventory levels after rising interest rates led some to slim down their safety stock, noted Brian Pacula, a supply chain expert at consultancy West Monroe.The Port of Los Angeles, the busiest in the US, has handled 27 per cent fewer containers this year than in the first five months of 2022.The negotiations, however, took place against a backdrop of falling pressure on US supply chains compared with the strains during the coronavirus pandemic.The average price for shipping a container from Asia to the US west coast jumped 19 per cent to $1,569 last week as port obstructions mounted, but this remained 85 per cent lower than a year earlier, according to Freightos, a freight data provider. More

It’s an intuitively appealing and somewhat alarming thesis. The globalisation of the past 30-odd years pushed down inflation across the world, as cheap imports from China cut the cost of clothes, toys and electronics to rich-country consumers. But the geopolitical fracturing of the world economy is now putting all that at risk. Christine Lagarde, European Central Bank president, warned in April that an escalation of US-China tensions could damage value chains and push global consumer prices up by 5 per cent.In reality, things aren’t that bad. There’s no doubt that a big dose of disorderly widescale economic decoupling would hit growth and raise prices. But current geopolitical tensions are unlikely to be cataclysmic, while globalisation (and, specifically, cheaper goods) has had less to do with holding down inflation than intuition suggests. More concerning is the possibility that deeper global structural forces will raise prices for years, perhaps decades, into the future.The coexistence of the rise in post-cold war globalisation and the “great moderation” — low inflation and stable growth — is superficially plausible. In practice, though, economists have found only a modest link and point instead at changes in monetary policy, lower inflation expectations and reduced uprating of wages in line with prices.For one, the periods don’t quite match. The “hyperglobalisation” period when world trade and global value networks grew most rapidly ran from the late 1990s until shortly before the global financial crisis began in 2008. By that point the fall in inflation in the rich world had largely already happened.Second, given that goods are much more highly traded than services, you’d have expected rising inflation differentials between the two. In fact, the gap remained constant until after the financial crisis, when services inflation actually fell while goods inflation rose.As a rough sense check of the impact of cheaper imports, those goods subject to low-cost Chinese competition like clothing, shoes and electronics make up quite small parts of the consumer price basket. In the eurozone, apparel and footwear are about 5 per cent of the total, compared with 15 per cent for housing and utilities (and that’s using a narrow measure of housing costs) and 10 per cent for restaurants and hotels.Nor does the integration of the big middle-income countries automatically push inflation down. It means increases in demand as well as supply. During the global food crisis of 2007-08, one very common story was that wealthier households in countries like China were increasing commodity prices by eating more resource-intensive fare, particularly meat.This brings us to Lagarde’s warning. A 5 per cent global uplift on top of existing inflation sounds gruesome. But on examination, the underlying estimates, while thorough and interesting, read like a thought experiment rather than a serious prediction.The ECB economists model the world breaking into geopolitical blocs putting up non-tariff barriers such as regulations and standards against each other. But those groupings are based on past voting records in the UN. Largely cost-free political posturing does not equal joining one gang to take an economic hit from the other.In this scenario India, for example, is in a China-centred camp. In practice it is highly unlikely that New Delhi, while it may be sceptical of the US and EU’s military and foreign policy support for Ukraine, is going to throw in its trading lot with a geopolitical rival like China — especially given India’s ambitions to export manufactured goods to Europe. Currently, the big emerging markets — India, Indonesia, Brazil — strive to remain economically non-aligned.Moreover, the estimates are based on an initial shock, without economies finding new import sources and export markets from within their own geopolitical sphere. A flexible response drastically reduces the price increase from 5 per cent to 1 per cent.So, all back to low-inflation normal soon? Not so fast. Other global forces are in play. One is demographics. The ageing of populations worldwide is likely to reduce labour supply and may increase workers’ bargaining power, meaning that higher inflation may lead to wage-price spirals. The cost of the green transition, too, with vast investments to be made in new technologies and the scrapping of old ones, creates a mismatch between demand and supply which is likely to increase prices.These structural forces are probably more important than the threat of geopolitical fracture and damage to the global goods trading system — absent, of course, a cataclysmic supply shock like a Chinese invasion of Taiwan. How such price level shocks feed into medium-term inflation depends on how central banks, workers and employers react. But those anxiously watching geopolitical tensions and mapping them on to the cost of living are probably looking in the wrong place. More

When the Federal Reserve announced its first reprieve in an aggressive 15- month-long campaign of interest rate rises on Wednesday, there was a sting in the tail. As widely expected, the US central bank held its benchmark rate steady after 10 consecutive interest rate increases. But it also signalled it would need to squeeze the world’s largest economy much more before the year is out in order to get a handle on stubbornly high inflation. Rather than raising rates just once more by a quarter point, as had been widely anticipated, most officials are now forecasting there will have to be two such increases this year, according to the so-called “dot plot” of their projections that accompanied the rate move. The incongruence of the decision — a pause accompanied by an even more hawkish stance — prompted Fed chair Jay Powell to launch a staunch defence of the US central bank’s approach that left some economists unconvinced.“It seemed to us to make obvious sense to moderate our rate hikes as we got closer to our destination,” Powell explained during a press conference on Wednesday as reporters peppered him with questions about the apparent contradiction. Moving more gingerly would not only give the Fed more time to assess future economic data and the damage done by the recent regional banking crisis, argued Powell. It would also allow policymakers to gauge the effect of the rapid monetary tightening enacted since last March, which may not yet be showing up fully in the real economy. However, Vincent Reinhart, who worked at the Fed for more than 20 years and is now at Dreyfus and Mellon, described Wednesday’s move as “a policy mistake wrapped in a communication error”. The Fed’s policy mistake, said Reinhart, was a failure to respond to a string of strong economic reports since the last meeting in May despite an oft-repeated pledge to be “data dependent”. The communication error, he added, was to seed expectations for a pause some five weeks ago, a move that left it reluctant to adapt “to changed circumstances”.

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According to the latest dot plot, most officials are now projecting the federal funds rate will peak at a new target range of 5.5-5.75 per cent, half a percentage point higher than when comparable forecasts were published in March. “They can’t sell it as a prudential delay of policy to await more information when the information you got led you to revise up your forecast [half a percentage point],” said Reinhart.Some economists detected signs of growing division among Fed policymakers in the topsy-turvy messaging. In the run-up to this week’s meeting, faultlines had emerged between officials over how much more pain to inflict on borrowers. Those advocating for a more cautious approach cited the possibility that the cumulative effect of the Fed’s tightening had yet to show up. That could result in unnecessary pain for an economy that, on the face of it, still seems to be remarkably resilient. The hawkish cohort, meanwhile, pointed to scant progress in stamping out “core” inflation, which strips out volatile food and energy costs. “To us, this looks like a meeting where the committee was split, everybody got something, and nobody got everything,” concluded economists at LH Meyer, a research firm. Tiffany Wilding, chief US economist at Pimco, guessed that the unanimous vote to pause on Wednesday had been the result of this “horse-trading”. The compromise that now appears to be on the table is for the Fed to raise rates potentially as soon at its meeting at the end of July. Powell on Wednesday sent a strong hint that this might happen when he said the gathering next month would be a “live one”. By then, said Powell, the Fed could take stock of three months of economic data as well as the “evolving risk picture”. At one point, he described the move as a “skip” before correcting himself: “I shouldn’t call it a ‘skip’ — the ‘decision’.” That only fuelled more questions over why the Fed was holding back, especially after the economic projections released on Wednesday showed officials had become decidedly more negative on the inflation outlook and more bullish on economic growth and the labour market. “If July is already live, it does raise the question [of] why do you even stop if you’re willing to immediately say we are going to go back?” asked Jean Boivin, the former deputy governor of the Bank of Canada who is now head of the BlackRock Investment Institute.

Dean Maki, chief US economist at Point72 Asset Management, cautioned the data ahead of the July meeting was unlikely to alleviate Fed hawks’ concerns, warning that “tension” among officials would likely persist before the central bank eventually implemented another rate rise next month.Wilding said she also expects the Fed to raise the benchmark rate then but admitted she is sceptical the central bank will follow through on the second increase, an assumption based on her forecast that the economy will soon slow down more decisively. She added the risks of the central bank overdoing it have risen as the end point of the tightening campaign has been steadily pushed out and revised higher. “That destination at some point needs to stop being a moving target [because] monetary policy works through lags and you run the risk of figuring out later on that you did too much” she said. “Then monetary policy all of a sudden just seems way too tight.” More

The European Central Bank is expected to raise its main interest rate to its highest level for 22 years, while warning that underlying inflationary pressures are proving stickier than it hoped.The outcome of Thursday’s ECB governing council meeting is set to underline how a majority of its rate-setters still think the risks of raising rates too little are greater than the downsides of potentially over-tightening monetary policy.However, after the US Federal Reserve hit pause on its series of 10 consecutive rate rises on Wednesday, the ECB is likely to indicate it is approaching the end point in its unprecedented increase in eurozone borrowing costs.Eurozone rates remain lower than in the US and ECB rate-setters broadly agree on the need to raise its main policy rates for an eighth time on Thursday, which would lift its deposit rate by a quarter percentage point to 3.5 per cent, its highest since July 2001. ECB executive board member Isabel Schnabel said this month: “Given the high uncertainty about the persistence of inflation, the costs of doing too little continue to be greater than the costs of doing too much.”Headline inflation in the eurozone has fallen from its 10.6 per cent peak in October to 6.1 per cent in May. But this was mainly due to lower energy prices and it remains well above the ECB’s 2 per cent target. The central bank has signalled it will not stop raising rates until underlying inflation, excluding more volatile elements like energy and food, is clearly falling.While some measures of underlying eurozone inflation dipped for the first time in May, this mainly reflected the introduction of Germany’s subsidised €49 monthly public transport ticket. ECB president Christine Lagarde said earlier this month there was still “no clear evidence that underlying inflation has peaked” and warned that “mounting wage pressures are becoming a more important driver of inflation”.Pay per eurozone employee rose 5.2 per cent in the first quarter compared with a year ago, up from 4.8 per cent in the fourth quarter, according to ECB data published last week. When the ECB issues new quarterly projections for growth and inflation on Thursday, these are expected to reflect higher wage growth and stickier services prices. Barclays economist Silvia Ardagna predicted the ECB would raise its forecast for core inflation, excluding energy and food prices, from 4.6 per cent to 5 per cent for this year. Tourist bookings and spending in Mediterranean countries like Spain are on track to bounce back above pre-pandemic levels this summer. This is set to lead to a further surge in air fares, hotels and package holidays, which have already risen at double-digit rates over the past year. Mark Wall, chief economist at Deutsche Bank, forecast a strong tourism season could be enough to reverse the recent dip in underlying price pressures — raising the prospect of further quarter-point rate rises not only at rate-setters’ July meeting, but also in September.However, other ECB watchers believe only one more rate rise is likely after this week as the debate on the trade-offs between inflation and growth becomes more balanced. Doves have urged more caution after revised official figures showed the eurozone economy shrank in the past two quarters. “Our monetary tightening will be felt in the coming months,” said ECB board member Fabio Panetta, adding this could “translate into prolonged sluggishness in economic activity, or even a technical recession”.Eurozone retail sales were down 2.6 per cent year-on-year in April, after adjusting for inflation. Industrial production in the bloc has barely grown over the past year and would have fallen in April without a sharp jump in Irish output due to intellectual property shifts by multinationals.The gloomier prognosis for growth is expected to be reflected in a cut to the ECB’s forecast for 2023 down from the 1 per cent expansion it forecast in March. “The economy has fallen into a mild recession, inflation is on the way down, global headwinds are battering manufacturing and credit volumes are starting to contract,” said Holger Schmieding, chief economist at German bank Berenberg. “The recent news flow has strengthened the case of the doves against tightening much further.”But after being widely criticised for being too late to respond to last year’s surge in inflation, the ECB seems determined to keep raising rates until there is little doubt that price growth is firmly heading towards its 2 per cent target.“Having misjudged inflation once, the governing council is not about to gamble that the interest rate increases so far will be enough,” said Stefan Gerlach, the former deputy head of Ireland’s central bank. More