According to Dragon’s Rock, global policymakers are planning ways to kill stagflation

Article content

Königswinter — The world’s top central bankers and finance ministers gathering near Dragonsrock in Germany on Thursday have to kill their own beasts: stagflation.

Seven as the war in Ukraine adds fuel to the surge in raw material costs, while new pandemic-related regulations in China slow down world trade, increasing high inflation and concerns about economic sustainability. A group of financial leaders are meeting in a stagnation.

“We need to discuss what we can do together in each area of ​​responsibility to avoid the stagflation scenario,” German Treasury Minister Christian Lindner said when the leader arrived at the two-day meeting. I told reporters.

Article content

Hotels like the Palace of Königswinter, where the event takes place, overlook Drachenfels, or Dragons Rock, where the medieval Nibelung legendary hero Siegfried allegedly killed a dragon who lived in a mountain cave.

Stagflation, a deadly and unruly thing like a mythical monster, had no easy solution. It stimulates the economy, prices run wild faster, close the taps of money and hinder economic growth.

After underestimating most inflation last year, most central banks, from the United States to Europe and Australia, have focused solely on curbing prices, which are rising at the fastest pace in decades.

The Federal Reserve, the world’s most influential central bank because of the dollar’s dominance in the world’s financial markets, has interest rates as much as it needs, even if some people may sacrifice their jobs. I promised to raise.

Article content

Even the European Central Bank, which until recently excluded almost all rate hikes, is now moving towards the first rise of more than a decade-probably some of the first.

But finance ministers are worried that sanctions on Russia will make the economy worse, as imports of raw materials from oil to wheat will be more expensive and will burden households in the same way that borrowing costs will rise. are doing.

US Treasury Secretary Janet Yellen told Bonn Wednesday that “the global economic outlook is difficult and uncertain, and rising food and energy prices will curb production and spending and increase inflation around the world. , Has a stagnant effect. “

She argued that the United States should eliminate tariffs of up to 25% on some non-strategic Chinese imports, such as bicycles, lawnmowers and T-shirts. feel safe.

Article content

Other governments such as Italy and Germany have reduced fuel taxes, and France has restricted prices for natural gas and electricity to mitigate the economic consequences of rising energy costs.

When Yeren previously described the US economy as having a recovery in COVID-19 and strong momentum from a strong labor market, “stagflation” (a term associated with the surge in inflation and slowing growth in the 1970s). I avoided mentioning about.

A generation ago, Fed Chair Paul Volcker entered an era of stable prices and steady economic growth, requiring a series of brutal rate hikes and recessions to overcome the recession in inflation.

The legendary hero Siegfried is also said to have become almost immortal after being bathed in the blood of a dragon.

But the economic blood is what today’s policy makers still want to avoid.

(Additional report by Paul Carrel and edited by David Lawder by Tomasz Janowski)