Inflation is falling—but not enough

pandemic the idea of an annual rate of inflation of 10% in the euro zone would have seemed like a horror story. In November it was good news. Inflation had been 10.6% the month before. A similar surprise came from America. As inflation falls, so does the expected pace of interest-rate increases. On December 14th and 15th the Federal Reserve, European Central Bank and Bank of England will each probably raise rates by half a percentage point—a deceleration from the three-quarter-point rises that have recently prevailed. Globally, inflation has begun to decline primarily because energy prices have eased since the summer and because supply chains, long gummed up by the pandemic, are operating more smoothly. Yet inflation remains a very long way from central banks’ 2% targets. There are three reasons to think rate-setters will struggle to hit their goals soon.