Opinion by Sebastian Mallaby: The inflation vacation is over. Adjusting is going to be painful.
from negative 9 percent to negative 37 percent in the space of a week. But Truss’s predicament also reflects a larger issue. Across the supposedly advanced economies, the return of inflation has magnified the riskiness of extravagant political gestures. For the most part, however, politicians have not gotten the message.
Central banks’ primary mission is to stabilize prices, so that the money in your pocket roughly holds its value. Money is supposed to be a store of wealth and a unit of account: When it ceases to perform these functions, the operating system of the economy crashes. Because of this inflation-fighting imperative, central banks now have to think twice before underwriting political expediency. Bailouts involve cutting interest rates and buying government bonds.