Braking Down The Noise

Higher Interest Rates Can Take a Long Time to Bring Down Inflation

Lags between rate increases and real-world impacts raise the twin risks of tightening too much and too little

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FRANKFURT—The world’s central banks face a nail-biting wait.

They have raised interest rates this year at the fastest pace in decades. But those hikes work with what economists call “long and variable” lags so central banks might not know for years if they have tightened too much, or not enough.

 

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