Economics focus: The crude art of policymaking

摘要

Inflation is creeping up. The euro area's average rate of con-sumer-price inflation rose to 2.5% in the year to May, up from 1.6% in February and well above the 2% ceiling set by the European Central Bank (ECB). America's 12-month inflation rate for the same month (due to be published on June 15th) is expected to rise towards 3%, up from 1.7% two months earlier. The blame for this jump in inflation lies largely with higher oil prices. Despite a dip over the past week, crude oil prices are still 25% higher than a year ago. Should central banks raise interest rates in response to a rise in the oil price? As Alan Greenspan, the chairman of America's Federal Reserve, acknowledged this week, the answer is not clear-cut. The dilemma is that higher oil prices not only push up inflation (thereby calling for a rise in interest rates), but also dampen growth (requiring rates to be lower than otherwise).