The world’s top central bankers meeting in Jackson Hole this weekend should do more than bemoan their respective financial risks. They should hammer out a joint approach to reducing global inflation, centred on a common public commitment to tighter monetary policies. Moreover, with the European Central Bank and a few emerging market central banks (such as those of Brazil and India) having taken the lead, the spotlight should be on the US Federal Reserve and People’s Bank of China. They must participate in this effort, rather than try to free-ride – which would only delay and increase the cost of their own inevit­able tightening.

The view of many central bankers is that there are few if any gains from monetary policy co-ordination. This view profoundly misreads the present situation. Inflation today is a global phenomenon arising from negative real interest rates and global demand running ahead of supply. This is especially true of commodities, but is also driven by declining potential output growth in the US and western Europe.