In the fight to combat high inflation, US and European central banks have embarked on aggressive tightening paths that seem all but guaranteed to continue in the near term. But how much damage to economic growth will they ultimately have to inflict to win this fight?
In the US, a heated debate has emerged about whether the Fed can rebalance an overheated labor market—a key requirement to tame inflation—without a sharp rise in unemployment. And in the Euro area, the ECB is stuck between a rock and a hard place as the region remains in the throes of an energy crisis that is both weighing on growth and contributing to high inflation.
