Stiglitz says rate hikes that are too steep may worsen inflation

CENTRAL banks that hike borrowing costs too aggressively to tame supply-driven inflation risk exacerbating price gains, according to Nobel laureate economist Joseph Stiglitz.

As activity restarts following pandemic lockdowns and countries like China struggle to restore normality, the global economy is enduring something “we’ve never done before,” the Columbia University professor said in an interview in Lindau, Germany.

“Raising interest rates doesn’t solve the supply-side problems,” he said. “It can even make it worse, because what we want to do right now is invest more in the supply-side bottlenecks, but raising interest rates makes it more difficult to make those investments.”

Policy makers are counting on tighter monetary policy taming the fastest inflation in a generation and keeping expectations about the future trajectory of prices in check. Stiglitz isn’t so sure.

With the US economy and others showing clear signs of “market power” — where companies can raise prices without