Governments told to align Fiscal and Monetary policies to control inflation

This week it was the Bank for International Settlements’ turn on the subject of inflation. Aside from encouraging central banks to stay the course, the BIS pointed out that getting inflation down is made harder when fiscal policy is running counter to monetary policy. The BIS’s solution is to encourage developed governments where inflation is a problem to raise taxes or curb spending as the fastest way to end the inflation problem.

By coincidence, Joe Biden effectively launched his re-election campaign and the topic he is keen to focus on is his Bidenomics stimulus programme. Biden’s poll ratings are not great and his advisers think he’s not getting the credit he is due from his stimulus. Although he is restricted by a Republican controlled lower chamber of Congress, the temptation for some form of extra stimulus in advance of next year’s elections must be great. Rishi Sunak and Jeremy Hunt face an even thornier dilemma in the UK. High inflation means further stimulus makes even less sense here, but a tax cut in advance of the next general election is one of the few options left to address the Conservatives’ terrible polling numbers. 

For the following stories, please click on this link*

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