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A global war on inflation

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For their part, central bankers are hoping to contain oil prices without causing a slump.

Mr. Yardeni predicts the world economy will trudge through the mess, with recession confined mainly to the American economy.

About the only thing economists see eye to eye on these days is that the path forward is lined with more challenges and uncertainties than a year ago.

On Monday, the Bank for International Settlements in Basel, Switzerland, sounded a cautionary note in its annual report.

"In the aftermath of a long credit-driven boom, it would not be surprising to see turmoil in financial markets, slowing real growth, and temporarily rising inflation," the report said. That mix "does appear to point to a deeper and more protracted global downturn than the consensus view seems to expect."

In this environment, a crucial question is: How many nations need to tighten monetary policy, and by how much?

Conflicting analyses

Some economists worry that the world's central banks have not yet awakened to the magnitude of the inflationary threat. Others say that the interest-rate moves under way, and those likely in the months ahead, will bring prices under control, assisted by the general weakening of economic growth.

Where the two sides agree is that monetary policy worldwide has been generally loose – and that this has been a major factor propelling fuel and food prices.

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