Central banks should ignore soaring energy costs

WAR IN UKRAINEECB has caused European natural-gas prices almost to double and sent oil prices soaring to over $115 a barrel. That has added to the inflation problem facing the world’s central banks. And more pain is probably coming. Western energy giants are getting out of Russia, sanctions are on Russian commodities exports and the cancelling of the Nord Stream 2 gas pipeline from Russia to Germany will remove a potential source of relief. If Russian energy exports are cut off completely, the oil price could reach $150, global consumer prices by another 2%.According to orthodoxy, rich-world central bankers should all but ignore supply shocks such as dearer energy. That is because their direct effect on inflation is only temporary. When policymakers ignore this rule of thumb things usually go wrong. In 2008 and 2011 the European Central Bank () raised rates because of supply-side factors, and ended up worsening the Great Recession and its aftermath.