Central banks face agonising choices.

 What they do next will reverberate across financial markets, threatening uncertainty and upheaval for workers, bosses and pensioners.

Equity investors are hoping that central banks can return inflation to their 2% targets without inducing a recession. But history suggests that bringing inflation down will be painful.

The costs of inducing a recession, together with the longer term pressures on inflation, suggest another scenario: that central banks seek to evade their nightmarish trade-off, by raising rates less than is needed to hit their targets and instead living with higher inflation of, say, 3% or 4%.

 They are likely to steer a course between high inflation and recession. Investors seem to believe that this can still end well, but the chances are that it won’t.

The Economist 22 June 2023

https://www.economist.com/leaders/2023/06/22/investors-must-prepare-for-sustained-higher-inflation