{"text":[[{"start":5.4,"text":"The Iran war has put central bankers in a bind. Nobody knows how long shipping in the Strait of Hormuz will remain disrupted for, and in turn how high global energy prices could ultimately rise. Households and businesses are, however, already feeling the pinch from dearer domestic fuels. Data released on Tuesday showed that annual growth in the US consumer price index jumped to 3.8 per cent in April, its highest in three years, and up from 2.4 per cent in February. "}],[{"start":34.45,"text":"If rate setters act too soon to contain inflationary pressures by raising the cost of credit, they risk adding insult to economic injury. If they hold steady to see how the conflict develops, there is a risk of waiting too long. Then they could be blamed for a surge in prices, similar to what happened in the aftermath of the pandemic and the Russian invasion of Ukraine in 2022. That said, central bankers are also aware that monetary policy is a rather blunt instrument for guiding prices through a volatile shock to energy supplies."}],[{"start":67.4,"text":"The strategy, so far, among major central banks has been to bide time. But the longer the conflict goes on, the more patience will thin, and the more hawkish policymakers will become. Last week, the Reserve Bank of Australia and Norges Bank bucked the trend by raising rates. And at their meetings last month the US Federal Reserve, European Central Bank and Bank of England conveyed growing concern about the pass-through of higher energy costs into the economy. Kevin Warsh, who is set to replace outgoing Fed chair Jay Powell this week, will face stiff resistance from a Federal Open Market Committee that is anxious about inflation if he pushes for a rate cut to appease US President Donald Trump."}],[{"start":111.10000000000001,"text":"The worried hawks ought to be taken seriously. Rich nations are less dependent on fossil fuels than in decades past but the war — which has triggered the largest oil supply shock in history — has already led to a notable rise in prices. In the US, a net energy exporter, petrol costs have jumped over 50 per cent. The latest price shock could also lead to a longer-lasting jump in inflation expectations, particularly in the US and UK where central banks have struggled to get price growth sustainably back to their 2 per cent targets in recent years."}],[{"start":147.10000000000002,"text":"Nonetheless, concerns that policymakers are at risk of repeating the mistakes of 2022 — when central banks tightened too late and inflation surged — should be kept in perspective. Circumstances are different this time. Then, economies were rebounding from lockdowns and stimulated by generous policy support. Right now, economic momentum looks weaker and fiscal support has, sensibly, been more muted. Rising energy prices are also crimping demand, which could help contain inflation. A higher cost of credit on top, then, risks squeezing economies excessively. Similarly, job markets in the US and Europe contain more slack today, which means that higher inflation expectations are less likely to trigger an upward ratchet in wages and prices. Interest rates, too, are much less accommodative than they were in the aftermath of the pandemic. "}],[{"start":201.8,"text":"For now, then, it makes sense for the Fed, BoE and ECB to continue their holding pattern, with hawkish messaging to help keep a lid on inflation expectations. Policymakers will need to monitor closely how much the conflict is suppressing demand, and how quickly higher energy costs are feeding into broader price pressures. At the same time, they must keep tabs on developments in the strait, and the risk of under-pressure governments being forced into providing more cost of living support. Like everyone else, central bankers are trying to navigate through an economic outlook obscured by the fog of war in the Middle East."}],[{"start":246.2,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1778643157_3990.mp3"}