Europe’s Monetary Over-Tightening Trap
Monetary policymakers, particularly in Europe, seem to have concluded that the risks of doing too little to tighten monetary conditions are too high, and it is better to err on the side of over-tightening. But there are good reasons to consider a more patient approach to inflation.
LONDON – Headline inflation is falling fast in the United States and the eurozone, following a succession of sharp interest-rate hikes by the US Federal Reserve and the European Central Bank. But monetary policymakers on both sides of the Atlantic have made it clear that they are not done yet. Are they going to go too far?