Central banks rethink forecasting after failures on inflation by Sam Fleming, Martin Arnold, Colby Smith published by Financial Times (12/2023).
“ECB, Fed and BOE overlooked potential for global price spikes after end of pandemic and Russian assault on Ukraine
Central bankers are rethinking their approach to economic forecasting after their high-profile failures to spot the most recent inflationary outburst, as officials argue for greater candour with the markets about the uncertainties they are confronting.
The European Central Bank, the Federal Reserve, the Bank of England and other official forecasters failed to see how the end of Covid-19 lockdowns and an energy shock triggered by Russia’s full-scale invasion of Ukraine could pave the way for the worst inflationary spiral in a generation…”
Mainstream Economics’ Medieval Inflation Medicine by James K. Galbaith published by Project Syndicate (12/2023).
Considering that the US inflation rate peaked in June 2022, there is no evidence that monetary policy had any significant effect on the direction taken by prices. Yet, like premodern physicians committed to the ancient humoral theory of disease, mainstream economists today have shown that they lack the tools to cure the patient.