FRANKFURT/WASHINGTON –
The world’s central bankers may be attempting the impossible: to get into the psyche of business executives, labor unions and ordinary households in real time to understand how they are navigating their finances through yet another energy shock.
Policymakers are contemplating whether to jack up interest rates to combat rising inflation. But they will only pull the trigger if they think a surge in energy costs induced by the Iran war will filter into other prices, lifting inflation expectations across the entire economy.
The problem is that measuring such expectations is notoriously difficult. Central banks have a trove of surveys, gauges and indicators at their disposal, but all of them have blind spots if not outright faults.