Inflation is now on the front page of newspapers around the world, and for good reason. Prices of more and more goods and services are increasing in a manner not seen for decades. This inflationary spike, accompanied by actual and feared supply shortages, is fuelling both consumer and producer anxiety. By also threatening to worsen inequality and derail a much-needed sustained and inclusive economic recovery from the Covid-19 pandemic, it is also becoming a hot political issue.

For their part, policymakers at central banks in the United Kingdom and the United States have started to move away from the narrat...