In recent weeks, concerns over inflationary pressures globally have taken the centre-stage even while there are no indications as to whether threats to financial stability have been fully resolved and whether persistent threats of recession in USA have abated. Consequently, the policy dilemmas have become more acute at the current juncture.
The most urgent and short-term priority for central bankers at the current juncture seems to be to calm the nerves about inflation or to anchor inflation expectations, with an implicit recognition that a somewhat elevated headline inflation in the short-term may be difficult to avoid. Further, high inflation rates when accompanied by higher variability of inflation, raises greater uncertainties.