THE US Federal Reserve's 75-basis-point hike last week - the largest interest rate increase since 1994 - aimed to curb soaring inflation, which has hit decade-highs in the US and the European Union.
Yet such hikes chiefly target demand-side inflationary pressures, while today's rising prices are fuelled by supply-side constraints.
The Business Times (BT) looks at the difference between demand-pull and cost-push inflation and the tools policymakers can use to contain it.
Demand-pull vs cost-push inflation
When prices rise due to fast growth in demand for goods and services, that is demand-pull inflation. This usually happens in tandem with overall economic growth.
Cost-push inflation occurs when the...