Central Banks Walk Tightrope between Inflation and Growth

The recent developments in the US and UK suggest that the struggle to restore price stability is far from over. The Federal Reserve has raised its benchmark rate by a quarter percentage point, marking its first increase in more than three years.

The new rate stands at 3.75-4.5 per cent, despite President Donald Trump's repeated demands for lower borrowing costs. Fed chairman Kevin Warsh has argued that inflation remains too high, while the central bank's projections indicate the possibility of further increases.

In the UK, the Bank of England has held its rate at 3.75 per cent, but three of its nine monetary policymakers favoured an increase. Governor Andrew Bailey has warned that prolonged energy-price volatility could require tighter policy.