The post-pandemic inflation surge has revealed several flaws with how monetary policy is conducted. These flaws were evident not only with inflation forecasting methodology – which this column has addressed previously – but also with the eventual response to the inflation surge. We’re now in the middle of an interest rate-cutting cycle from several of the major central banks and yet we are now seeing a real divergence in inflation dynamics. Goods price inflation is back to normal, while services inflation has remained at stubbornly high levels – being almost impervious to rate hikes and tight monetary conditions. The latest…

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