A recession is coming. And there's a danger it will be deeper and last longer than the 2008 crisis. But was this inevitable, or the making of central banks? David Blanchflower argues that a certain group-think is driving central banks to overreact to inflation pressures by sharply raising interest rates and thus inevitably triggering a recession. That recipe for dealing with inflation is based in the past, when a price-wage spiral was a big risk. But that world no longer exists. Central banks need to wake up to this new reality before they take us all down with them.

Inflation has sharply increased around the world, caused mostly by a series of supply-side shocks, including a loss of workers due to Brexit and the pandemic, bottlenecks as demand picks-up after lockdowns, the zero-Covid policy being pursued by China and the outbreak of a European war in Ukraine. In the UK the CPI has hit 9%. But the likelihood is that this rise in inflation is temporary. Even though it has taken longer to come down than I expected, just as night follows day, over the next few months inflation will drop sharply. House prices are coming down soon.