Inflation seems to be bubbling again in the U.S., but not enough to convince everyone that the pricing cat’s out of the bag. But if it’s still easy to dismiss America’s uptick in pricing pressures, the task becomes tougher when considered globally.
As inflationary sightings around the world rise, the probability also increases that the general trend reflects something more than a statistical anomaly of limited relevance. The reasoning unfolds as follows: Inflation is primarily if not wholly a byproduct of monetary mismanagement. Meanwhile, there are many central banks operating on the planet, and many operate independently of their counterparts. The evidence is found in the fact that rates of inflation and money supply growth and interest rates vary. No one would confuse the state of monetary affairs in Japan, for instance, with that of the U.S. Japan has a number of economic challenges, but rising inflation isn’t one of them. The U.S., by contrast, seems to be looking at a more challenging inflationary scenario. To the extent that such differences apply, the source of the praise or disapproval frequently lies with the local central bank.
Of course, globalization has dimmed the power of central banks compared to the past. But the loss of sway over prices is far from absolute. Central banks still matter, which is to say they continue to wield enormous influence over prices in the long run. Accordingly, central banks, if they’re so inclined, can unleash the forces of higher or lower inflation.