Inflation is once again rising across advanced economies, driven by geopolitical turmoil, surging energy prices, and fragile supply chains rather than excess demand. Yet policymakers continue to treat it as a monetary problem, relying on a tool that cannot address the underlying causes.
LONDON—For much of 2025 and early 2026, central banks have framed their decision to hold interest rates steady as an exercise in prudence. With inflation once again edging upward even as growth slows, institutions like the US Federal Reserve and the Bank of England have emphasized patience and “data dependence” as the responsible course, an approach shaped above all by lingering fears of recession.