Will central banks ultimately fail in their goal of lowering down inflation?

[pooya87]

It is impossible to ditch fossil fuels for good because energy is not their own usage. From your mouse and keyboard that are made from oil products to fertilizers that use gas and gas products need fossil fuels.

As for nuclear energy, the problem is that the technology is in the hands of a small number of countries, and they have to build nuclear facilities for 90% of the world (they will not allow you to have the technology at any cost either). On top of that the nuclear fuel is also in the hands of a small number of countries (like Russia!) which means switching to nuclear energy comes with the same dependence as fossil fuels.

Well that sucks. If that is the case, governments would be "deadlocked" in their efforts to help restore the economy back to its former glory. Unless the war between Russia and Ukraine ends, I don't think things will improve anytime soon. Sooner or later, this will be all over as wars don't last forever. We're yet to see whenever the pandemic will disappear in the distant future or be with us forever. Everything will depend on governments' collaborative efforts to help put an end to all of this mess for good.

I just hope world countries don't end up like Venezuela with a hyperinflation that makes it impossible for poor people to acquire life necessities. It will be complete chaos if this happens, greatly establishing a fine line between the wealthy and the poor. The future is widely uncertain right now, so we can only hope for the best. Just my thoughts

It is the shift of power from West to East, it is described as giving birth. It is hard and painful and it also takes time but the end result is beautiful. This is also why the effects in the West are more severe than the effects in the East. Right now any politicians in the seats of power that have accepted the New World Order is putting their country in alignment with that new Order. Others that don't accept it are resisting or denying it altogether while they experience increasing number of crisis.

For example UK is facing a cost of living crisis with mass protests and strikes every day that has reached their rail workers halting the public transport. This is on top of electricity blackouts and water cut offs in different parts of the country like Manchester, Northumberland, Farington, ... that the English are facing.

[dezoel]

Sometimes the government relies too much on the central bank to overcome inflation, in my opinion this is a mistake, without increased production, inflation will continue to occur, and it is proven that many central banks fail to overcome inflation so as to make the economy chaotic.

The governments all over the world rely on central banks to control inflation which is constitutional role of the bank in many countries and government can't interfere in it. Central banks usually control it by money tightening or softening policy which usually works but you are also right that that governments on their part should play their role by increasing agricultural (food price is an important component of inflation calculation) & industrial product which can equally work to bring down inflation.

I don't think so. Maybe the banks can do something to help the issues in inflation but some governments do also their best to help. They know that it was mostly their role but I agree that government should help the agricultural industry so that more supplies of the food are going to be produce and their prices won't rise anymore.

Other than the food, another driver of the inflation can be the oil. Many times when the price of the oil rise, other goods do also follow. Maybe the government can also do something to help increase the production of the oil's but whenever there is a sanction, this can still cause an issue. This is hard to avoid.

[Abiky]

It is the shift of power from West to East, it is described as giving birth. It is hard and painful and it also takes time but the end result is beautiful. This is also why the effects in the West are more severe than the effects in the East. Right now any politicians in the seats of power that have accepted the New World Order is putting their country in alignment with that new Order. Others that don't accept it are resisting or denying it altogether while they experience increasing number of crisis.

For example UK is facing a cost of living crisis with mass protests and strikes every day that has reached their rail workers halting the public transport. This is on top of electricity blackouts and water cut offs in different parts of the country like Manchester, Northumberland, Farington, ... that the English are facing.

I wonder if both China and Russia will constitute what would be called a "New World Order"? The West seems to be showing signs of weakness, so I wouldn't be surprised if this happens within the not-so-distant future. If democracy loses, then authoritarianism will reign supreme over world countries. Some say the US will collapse, paving the way for autocratic countries (like the ones mentioned previously) to take over the world. If this happens, then we will be nothing but doomed.

We'll see how long countries will keep funding Ukraine as inflation continues to soar like there's no tomorrow. It's likely they will stop supporting Ukraine in the future as they head themselves towards a tough financial situation. Unless the conflict comes to an end, we can't expect the global economy to show signs of recovery anytime soon. The future is widely unpredictable, so we can only hope for the best. Just my thoughts

[Lubang Bawah]

Inflation is a difficult thing to cure, usually inflation will continue to occur and repeat, the central bank will try to increase the income of citizens by many roads, the central bank will provide convenience for loans to banks so as to make citizens can be helped and earn income that can cover inflation .

[coupable]

One of the parties causing the crisis cannot be a party to finding a solution. Central banks will not issue policies and steps that do not serve their personal interest.
Inflation is dealt with on a broad level by developing policies and procedures to limit its extent. Central banks are considered the main cause of this problem when they try to fill the deficit that they caused by devaluing the currency, and this is usually by printing more of it. Preventive measures are taken in light of a booming economy and not in a permanent reality to deal with crises .

[BigBos]

Inflation is a difficult thing to cure, usually inflation will continue to occur and repeat, the central bank will try to increase the income of citizens by many roads, the central bank will provide convenience for loans to banks so as to make citizens can be helped and earn income that can cover inflation .

Of course, inflation is very difficult to cure and often recurs if money is not printed with the right rules and measures, but that does not mean it cannot be normalized.
Inflation is a natural thing if it occurs if it is within normal limits of 1-3% but it will be dangerous if it exceeds that presentation, this can be caused by a shortage of raw materials so that production cannot meet people's demand so that goods that people need become scarce in the market, that which caused a significant price increase. If the central bank plays a role only by relaxing the rules for making loans, it will be detrimental in my opinion. The problem here is not that there is no money, but that there is too much money in circulation and the circulation of commodity goods is limited, which causes prices to soar. Here what must play an important role is the government which can find supplies of commodity goods or substitute alternatives to fulfil market demand.
Maybe the central bank's discretion is to raise interest rates to reduce the circulation of money in society and stop printing money.

[Argoo]

That's certainly true, mate. Unless COVID-19 and the Russo-Ukraine war go away, we can't expect inflation to ease anytime soon. Governments are going to need to work together to put an end to the war for the good of the economy. I'm wondering if prolonging the war is a plan for governments to go full-speed ahead for a global reset. Effectively, the rich have become richer, while the poor, poorer. Let's see how long will it take for inflation rates to lower down to an acceptable rate. It's a widely unpredictable world we're living into, so we can only hope for the best. Who knows what the future holds for the global economy? Just my thoughts

Russia's war in Ukraine will go on for about another six months, according to the most optimistic forecasts, and should end in Russia's defeat. It is already quite clear that Russia cannot win the war it started. But it can still drag on and this will really lead to a further aggravation of the economic situation in the world. In order for it to end quickly, it is necessary for the states to unite and force Russia to stop its aggression.
As for inflation, it is an important companion of the economy of states and plays both a negative and a positive role.

[Abiky]

Russia's war in Ukraine will go on for about another six months, according to the most optimistic forecasts, and should end in Russia's defeat. It is already quite clear that Russia cannot win the war it started. But it can still drag on and this will really lead to a further aggravation of the economic situation in the world. In order for it to end quickly, it is necessary for the states to unite and force Russia to stop its aggression.
As for inflation, it is an important companion of the economy of states and plays both a negative and a positive role.

The world can't stand much pain for long. Ever since the COVID-19 pandemic emerged, things have been going south at a very fast pace. The Russia-Ukraine war have aggravated the situation. I think that's the reason why inflation won't go down easily. Central banks may try to keep raising interest rates, but if the war and the pandemic doesn't come to an end, they will ultimately fail in trying to lower down inflation for good.

I just hope things go back to normal soon, as poor people are becoming poorer over time. It would be totally unfair to see the rich becoming richer, while the poor gets left behind in the dust. Who knows what the future lies for the global economy? Just my thoughts

[Inwestour]

One of the parties causing the crisis cannot be a party to finding a solution. Central banks will not issue policies and steps that do not serve their personal interest.
Inflation is dealt with on a broad level by developing policies and procedures to limit its extent. Central banks are considered the main cause of this problem when they try to fill the deficit that they caused by devaluing the currency, and this is usually by printing more of it. Preventive measures are taken in light of a booming economy and not in a permanent reality to deal with crises .

It can be said in simple terms that when you control the printing of money, then you will not worry about the inflation rate, because you can always print more. This approach to solving problems in the economy is initially doomed to failure, but this will not worry people who put their own interests above the interests of society in the first place.

The low-income strata of the population will always suffer from rising inflation, because for them the rise in prices for essential products will be very noticeable.

[Sithara007]

Let's admit that double digit inflation is here to stay. Most of the governments around the world are resorting to handing out freebies in exchange of votes, and the era of fiscal conservative policies is over. Here in India, there is a competition between different political parties to hand out the maximum number of freebies. But the problem is that tax revenue is constant and not growing. The only solution here is to print additional amounts of money, and this is resulting in higher inflation rates. And given the rate of printing money, I would expect the inflation rates to go up considerably in the next 4-5 years.

[Moneyprism]

actually the problem is not a pandemic, but the ongoing wars and geo-political tensions in many countries,, that's what increases inflation. moreover, countries are now very protective of their resources, this will make inflation worse .. and moreover there has been more and more speculation that will make recession even more real in the future and this will increase inflation in many countries and the role of the central bank alone will not be enough to overcome this problem

[oaz7t]

They better fail at it. This will make bitcoin look brighter option in terms of securing the value for it. Imagine bitcoin being the volatile asset still holds amazing value compare to what best assets and fiats out their. I dont know how bitcoin will be able to fight the inflation but with way it is holding valuation it is going to do miracles in the future. Central banks can only do one thing and that's by printing more and more money but that's out of nothing. The only energy they use is paper & some electricity. In fact they waste it anyways. So they will eventually fail, they will have to at least consider the crypto currencies to liquidate the market more.

[stompix]

So, nobody is looking at the current numbers and the trend and commenting on how the government will fail and inflation will rampage for decades destroying the entire civilization in its path?

Some good news for every normal person, and some very bad news for every doom and gloom worshiper:
German inflation drops more than expected to 9.6%

Consumer price inflation dropped to 9.6 per cent in the year to December, well down on the 11.3 per cent registered the previous month, after Berlin implemented measures to shield consumers from high gas prices.The figure, published by the country’s federal statistical agency on Tuesday, was also lower than the 10.7 per cent forecast by economists polled by Reuters.

Surprise French inflation drop adds to signs Europe prices are cooling
PARIS, Jan 4 (Reuters) - Inflation in France unexpectedly dropped well below 7% in December from a record high a month earlier, data showed on Wednesday, the latest sign that slowing energy price rises are helping Europe overcome the worst of the inflation crisis.

Spain's 12-month inflation slows down again in December to 5.8%

Dec 30 (Reuters) - Spanish consumer prices rose 5.8% in December - at their slowest annual pace this year, thanks to lower electricity prices compared to a year ago, flash data from the National Statistics Institute (INE) showed on Friday

Of course, that's not happening in every country, in some, it just breaks record after record
Iran's Inflation Rate Topped 48% in December
but we're not talking about countries that were economical failures even before the war or covid!

I just wonder how much hate this good news will receive!

[harapan]

No they cannot do that.

I believe banks makes more from the increase and the high inflation around the world.
It's impossible to be expecting too much from banks when you equally know they are part of the problems involved with inflation how do they provide a solution ?

[kryptqnick]

Global recession was meant to happen in the early 20s even without the pandemic and without the war. During the pandemic, risky measures were actively introduced to basically postpone a recession. However, you can't cancel it, and the riskier money printing gets, the more chance there is of things getting out of hand. Russia's war against Ukraine certainly didn't help, given its impact on supply lines and energy prices. I do believe that there will eventually be economic recovery and growth, and that we're still far from the sort of global crisis that would push humanity to abandon the fiat model altogether, but IMO it will take several years to overcome what's only starting now (not stabilizing inflation because stompix is right it's already not so bad in many places, but growing global economy), and it will be a difficult period.

[barbara44]

Not really, they don't need to drop the prices, people are somehow expecting prices to fall and I have no idea why, they just need to keep prices going up just a bit, or not at all, which is quite possible. As long as you give good high interest rates, people will use all that extra money to invest and that means there will be lack of money and that means people will keep the prices cheap to be able to sell because if they keep it high then nobody would buy it since their money is in interest.

As simple as that, it is literally a high school freshmen level mathematics and everyone should be aware of it, nothing complicated going on here.

[Gyfts]

Inflation will normalize if the currency hasn't completely collapsed as long as there isn't an increase in spending or money supply. You'll just have to pay higher prices for goods than you did in the past. Central banks will be successful but that isn't really the point. The point is that there's a systematic process by the banks and government to keep inflation at 1-2% yearly in order to promote currency usage and there isn't even a guarantee that the banks can hit this target. If the government decides to print more money, it's their prerogative without advisory from the citizens.

Citizens get their purchasing power reduced, and there isn't anything they can do about it even after inflation is stabilized.

Yes: Currency devaluation is worse than inflation like it happened many developing countries after Ukraine war broke out and price of food & crude oil skyrocketed due to disruption in supply chain. The worst hit country was Srilanka where foreign exchanged reserves were totally diminished and no dollars were left in their central bank to pay their import bills. The Ukraine war is the mother of all economics crisis, it should come to an end now.

Important distinction between the Ukrainian war related "inflation" and central bank induced inflation is that theoretically after the war reaches conclusion, you would expect prices of goods to go back down as the supply stabilizes. When the central banks begin messing with the money supply via interest rates or when the government decides to spend money it doesn't have, consumer demand artificially rises with the new circulating cash and it won't go down unless the cash is removed from the economy.

The war isn't as dangerous to the long term global economy as the COVID-19 spending frenzy was.

[Abiky]

Let's admit that double digit inflation is here to stay. Most of the governments around the world are resorting to handing out freebies in exchange of votes, and the era of fiscal conservative policies is over. Here in India, there is a competition between different political parties to hand out the maximum number of freebies. But the problem is that tax revenue is constant and not growing. The only solution here is to print additional amounts of money, and this is resulting in higher inflation rates. And given the rate of printing money, I would expect the inflation rates to go up considerably in the next 4-5 years.

I guess there's been too much harm to the global economy where there's no point for recovery. We'd have to accept a new reality where inflation is in the double digits. It was all caused by the COVID-19 pandemic and the Russia-Ukraine crisis. Central banks will eventually give up, leading us to the weakening of Fiat currencies around the world (as a result of inflation). An easier solution for the rising costs of goods and services would be to raise the salaries of workers. I know employers are too greedy to do this, but I believe they will change their mind as the world faces a new reality.

With the aforementioned catastrophes, Bitcoin is expected to rise bigger and stronger than ever. Just wait until central banks (like The FED) stop raising interest rates for BTC to go all the way to the moon. Who knows if many BTC holders will become rich soon? Just my opinion

[Mauser]

Do you think such financial entities will fail in their goal of lowering down inflation? If not, why? Is there still hope for a global economic recovery when the war and the pandemic are at play? Your input will be greatly appreciated. Thanks.

The FED had been doing a good job in my opinion, they managed to increase interest rates much faster than other central banks. It remains to be seen in 2023 how this going to continue, but I think that the FED will keep reacting faster to changes in inflation. Here in Europe the ECB is reacting much slower and seems to be more concerned about the financing rates of governments. Increasing interest rates means that every time government debt is being rolled over the interest rates will increase a lot. Printing new money to save countries with too much debt is not an option anymore. Overall I do think the central banks can bring down inflation with the tools they have. The question is which is going to be their target level for inflation.

[Viscore]

Not really, they don't need to drop the prices, people are somehow expecting prices to fall and I have no idea why, they just need to keep prices going up just a bit, or not at all, which is quite possible. As long as you give good high interest rates, people will use all that extra money to invest and that means there will be lack of money and that means people will keep the prices cheap to be able to sell because if they keep it high then nobody would buy it since their money is in interest.

As simple as that, it is literally a high school freshmen level mathematics and everyone should be aware of it, nothing complicated going on here.

I don’t put my high hopes on that. Central banks have less chances to lower the inflation down since it’s a worldly effect and is experienced all over the world, and I don’t even think it can still be in controlled either. The only thing they can help the people is to increase the interest rate of our deposits as it can be profitable on the part of their clients. Either way, this inflation will stay for good but hopefully prices will not increase that much that average people will hardly afford it.