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Economics

The Great Inflation Mystery

The people who set interest rates don’t know what causes inflation, how to measure it, or how to move it up and down.
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Illustration: Tomi Um for Bloomberg Businessweek

The first principle of war is “know thine enemy.” But as Federal Reserve Chairman Jerome Powell and his colleagues raise interest rates to keep the U.S. economy from overheating, there’s a lot they don’t know about the foe they’re trying to contain: inflation.

Here are some of the things about inflation the Fed and other central banks are uncertain of: what causes it; what effects it has; what to count in measuring it (stock prices?); how low, or high, it should be; and how to move it up and down.