A Global Approach Is Needed to Beat Inflation

Adam Posen is an astute observer of international economics and the Peterson Institute for International Economics. His colleague, Arvind Subramanian, is a Senior Fellow. Here they give some sage advice to the worlds central bankers in a commentary on ft.com. The fed has set off a world wide inflation and I will take teamwork to defeat it.

A global approach is needed to beat inflation

By Adam Posen and Arvind Subramanian

The Financial Times: August 21 2008

The world’s top central bankers meeting in Jackson Hole this weekend should do more than bemoan their respective financial risks. They should hammer out a joint approach to reducing global inflation, centred on a common public commitment to tighter monetary policies. Moreover, with the European Central Bank and a few emerging market central banks (such as those of Brazil and India) having taken the lead, the spotlight should be on the US Federal Reserve and People’s Bank of China. They must participate in this effort, rather than try to free-ride – which would only delay and increase the cost of their own inevit­able tightening.

The view of many central bankers is that there are few if any gains from monetary policy co-ordination. This view profoundly misreads the present situation.