THE VIEW FROM AUGUST—WAS INFLATION THE MOST IMPORTANT CONCERN?

THE VIEW FROM AUGUST—WAS INFLATION THE MOST IMPORTANT CONCERN? I have kept some issues of the Economist from this August. One of the leaders (a “leader” is an Economist editorial) reviewed the financial difficulties of the previous year. The editorial set out two main goals for central banks: “The central banks’ credibility depends on being prepared to do two unpopular things: raising interest rates, despite the economic pain, and letting financial institutions fail.” And it concluded with a strong recommendation: “Central banks’ credibility should be focused where it is most needed, on controlling inflation. That credibility was too hard-won to be tossed away.” At the time, only three months ago, the Bank of England and the European Central Bank were giving priority to fighting inflation.