Central Banks are faced with an existential crisis. After doing their fair share to save the world from a protracted crisis, they are now faced with a new challenge: acting strong to show credibility when they know most of the inflation shock is supply-driven and imported. Do they have to hike the world into recession to regain some credibility? What options do the Fed and the ECB have? Where do we stand on the Faustian Pact between monetary and fiscal policies after “The Great intervention”?
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