As growth slows around the world, fighting inflation appears to be going out of fashion. Nowadays, any number of politicians, businessmen, and even a few economists in Asia and Latin America object to central banks targeting a low level of inflation as their primary objective. They look at the actions of America’s Federal Reserve Board in the 1990s and argue that every central bank should focus on promoting growth. But viewing growth as something distinct from keeping inflation in check evidences a basic confusion, for low inflation promotes stability in the financial sector, and the combination of the two promotes growth.
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While carbon pricing and industrial policies may have enabled policymakers in the United States and Europe to avoid difficult political choices, we cannot rely on these tools to achieve crucial climate goals. Climate policies must move away from focusing on green taxes and subsidies and enter the age of politics.
explains why achieving climate goals requires a broader combination of sector-specific policy instruments.
The long-standing economic consensus that interest rates would remain low indefinitely, making debt cost-free, is no longer tenable. Even if inflation declines, soaring debt levels, deglobalization, and populist pressures will keep rates higher for the next decade than they were in the decade following the 2008 financial crisis.
thinks that policymakers and economists must reassess their beliefs in light of current market realities.