What comes next will set the path for the world economyCentral banks are supposed to inspire confidence in the economy by keeping inflation low and stable. America’s Federal Reserve has suffered a hair-raising loss of control. In March consumer prices were 8.5% higher than a year earlier, the fastest annual rise since 1981. In Washington inflation-watching is usually the preserve of wonks in shabby offices. Now nearly a fifth of Americans say inflation is the country’s most important problem; President Joe Biden has released oil from strategic reserves to try to curb petrol prices; and Democrats are searching for villains to blame, from greedy bosses to Vladimir Putin.It is the Fed, however, that had the tools to stop inflation and failed to use them in time. The result is the worst overheating in a big and rich economy in the 30-year era of inflation-targeting central banks. The good news is that inflation may have peaked at last. But the Fed’s 2% target will remain
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