Outside View

Generals are often criticized for fighting the last war. What about central bankers who seem unable to grasp the lessons of the last emergency, still less to anticipate the next one? By putting central banks in charge of the response to the current crisis, governments risk a worldwide recession precipitated by excessive rate rises.

That was the warning from the United Nations Conference on Trade and Development (Unctad) this month, and it arrived not a moment too soon. Central banks cannot bring inflation down at a socially acceptable cost. Raising interest rates as pandemic support ends will hit incomes. The result will be akin to the “shock therapy” inflicted on voters by austerity policies after the financial crisis of 2008. The difference between then and now is that monetary tightening by central banks, rather than cutting government spending, is being used to engineer a downturn.

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