Responding to global stagflation

Against an increasingly stagflationary global backdrop, domestic policy will have to judiciously assign different policy instruments to help achieve competing macro objectives

The global outlook is looking increasingly stagflationary in the near term. An unrelenting array of adverse supply shocks — from manufacturing supply chains to commodity and labour markets — have simultaneously caused activity to slow and prices to rage around the world. The US has already registered two quarters of negative growth, and while this may not be characterised as a recession just as yet, given the strength of the labour market, the writing is clearly on the wall, particularly in Europe hit by a new natural gas shock. What’s more worrying is the Fed will have to keep hiking