Marshaled by the U.S. Federal Reserve, central banks around the world have had a unifying philosophy over the past year: Bring down inflation no matter the cost, even if it means risking pain for people and businesses. But that approach has been questioned more than ever this month in the wake of several high-profile banking collapses in the U.S. and Europe. Now a British economist who predicted the 2008 global financial crash has escalated the issue, saying central banks prefer “class war over financial stability.”
The Fed and other central banks have underlined tight labor markets and high wages as key underlying causes behind inflation. But while loosening job markets might help cool down the economy, it also means layoffs, joblessness, and a potential recession—an unacceptable and risky trade-off for some critics.
