The US and Europe should decouple on monetary policy 

AFTER a pandemic, a war in Europe and the worst global inflation for 40 years, central bankers are fully justified in taking a safety-first approach. Seeking to optimise economic outcomes has taken a back seat in favour of managing risks. The big question for the summer is how officials can best set monetary policy with risk management front of mind.

To navigate the economic evidence, central bankers first need to be clear about which risks they are managing. The only ones that matter are those that affect economic activity, inflation and people’s lives.

Too often, central bankers say the worst outcome would be to start a period of interest rate moves and then change their minds. This might be difficult for their personal reputation, but it carries few costs for society. If central bankers follow the path of having to be absolutely sure before taking a decision to move rates, they will guarantee that interest rate moves are late. This can result in genuine costs for others to bear.