In the view of a central banker, the worst thing about skyrocketing food and energy prices around the world is not that they are rising, but that more people believe they are here to stay. Worries that a psychology of inflation not seen since the long run of sharply rising prices in the 1970s is taking root have become a common denominator of both the European Central Bank and the U.S. Federal Reserve, which are moving at their own speeds to cool expectations of higher prices.
The current bouts of higher inflation - 3.7 percent in the year through May in the euro area and 4.2 percent in the United States - are particularly dicey. If investors, companies and employees decide that these inflation rates will become more common, they will bid up prices, wages and interest rates for the day-to-day lending that lubricates all modern economies, now a serious threat in the view of worried central banks. "They can't change current prices," said Jacques Cailloux, chief European economist at Royal Bank of Scotland in London. "What they are pretty convinced that they can do is dampen inflation expectations."
Tratto da "apa.org" - prosegui nella lettura dell'articolo