How Central Banks Won the Battle But Lost the War
In this Bloomberg Originals mini-documentary, we explain why managing inflation in the future may be more of a team sport.
As US inflation subsides and the Federal Reserve readies its first interest rate cut since the pandemic, central bankers must confront a new reality: in the fight against rising prices, they are no longer the only show in town.
For the last 40 years, central banks wielded interest rates to keep inflation under control—and they often looked like maestros doing it. But then the coronavirus struck, and with it came lockdowns and a sudden recession. Governments prescribed massive cash expenditures to keep economies afloat, but that medicine came with a side effect: inflation. At first, Fed Chair Jerome Powell called rising prices “transitory.” He was wrong, and Americans saw their cost of living rise more than 9% in a year. In the Bloomberg Originals mini-documentary How Central Banks Won the Battle But Lost the War, we explain why the Fed’s delayed reaction may have diminished its power.