Growth and inflation beyond expectations: now it’s up to the central banks

“Should central banks tighten monetary policy because the price of toilet paper rolls has suddenly risen?” The rhetorical question of Paul Donovan, chief economist of UBS Wealth Management, in Bloomberg, encapsulates the dilemma of Christine Lagarde, Jerome Powell and the other guardians of the most important economies on the planet: how to respond to inflation? Is it a temporary factor, as Donovan thinks, or the beginning of a long-lasting return on high prices? In the next few days we will know the answers, first from Frankfurt, where the European Central Bank’s high command meets on Thursday, and then from Washington, where Powell and the other Federal Reserve bigwigs will meet on Tuesday and Wednesday next week.