The inflation rate in Great Britain has climbed to a 9 percent high in forty years.

This is putting the population under painful pressure, as is the Bank of England (BoE).

The price increase is now almost twice as high as forecast six months earlier.

At the time, Federal Reserve Governor Andrew Bailey assured that inflation would only be "temporary".

Many experts are no longer so sure.

We are now a long way from the two percent target value set by the British central bank, which the European Central Bank (ECB) and the American Fed are also aiming for as an anchor.

However, if the inflation expectations of the markets and the population were to be "unanchored" and shifted upwards permanently, that would be fatal.

Countermeasures would become increasingly difficult.

It was only a quarter of a century ago, in the spring of 1997, that the Bank of England gained political independence.

A proud moment for the "Old Lady of Threadneedle Street".

Bailey is now rightly saying that the Fed is facing its "biggest test" in 25 years.

Business groups call inflation figures "shocking";

Millions of people in the population are worried about how they are going to make ends meet by the end of the month.

The ruling Conservative Party of Prime Minister Boris Johnson, which has come under the harshest criticism because of the exploding cost of living, is now blatantly attacking the monetary politicians.

The central bank recognized the dangers far too late.

Bailey "fell asleep behind the wheel," sneered a committee chair in the House of Commons at a hearing.

The political attacks on the independent institution are disturbing and partly unjust.

Normalizing interest rates at a snail's pace

Some developments were unforeseeable for the central bankers - namely Russia's attack on Ukraine and the resulting further jumps in oil and gas prices as well as the now "apocalyptic" (Bailey) price increases for food.

Eighty percent of inflation is due to external factors beyond the central bank's control, Bailey claims.

Is that really true?

What about monetary factors?

Hasn't the years of extremely loose monetary policy also prepared the ground for prices to rise across the board?

Since the financial crisis of 2008, key interest rates have been at record low levels worldwide.

The "normalization" of ultra-low interest rates is progressing at a snail's pace.

The Bank of England has begun a tentative turnaround in monetary policy since December 2021 and increased the key interest rate in four steps to one percent.

In view of the ten percent inflation forecast for the autumn, the still historically low key interest rates seemed “really very strange”, says former central bank governor Mervyn King.

He has also long criticized "quantitative easing", the bond purchases in the hundreds of billions.

As a result, the money supply has grown significantly.

The central bankers' great concern is that a wage-price spiral will set in motion in the very tight labor market.

Bailey is therefore calling on citizens for wage moderation.

His appeal to "think and reflect" before demanding compensation for inflation in salaries is not well received.

Citizens who can hardly pay their bills simply do not want to accept falling real wages.

How should the central bank react to high inflation?

Some are calling for much faster rate moves.

The market expects a key interest rate of 2.5 percent by mid-2023, central bank veterans are already talking about four or five percent.

Some of the active monetary politicians fear that the monetary policy will slow down too sharply, which will stall the economy.

BoE chief economist Huw Pill hopes inflation will fall sharply in 2023 as the energy price shock drops out of the year-on-year comparison.

His predecessor Andy Haldane doubts that. He believes that inflation will remain higher in the long term while the economy is sluggish.

However, a repeat of the 'stagflation' of the 1970s is the last thing the West needs at this tense time.

If citizens lose confidence in the central banks' ability to keep inflation under control, it would be an epochal failure.

The speedy departure from the historically ultra-low interest rates is inevitable.