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Krugman said the G20 meeting repeated the same mistakes of policymakers in the 1930s who targeted inflation and "sound money" at a time of banking frailty and huge imbalances in the world economy.
Excluding mortgage-interest payments, prices rose by 6.4%, the same rate as in May, keeping targeted inflation above the central bank's 3-6% range.Poland's central bank kept its benchmark interest rate at 4.5% on July 25th.
In practice, however, most of the increases will amount to a straightforward rise in pay well above the targeted inflation rate of 2.5% a year.If regular public-sector pay is set to grow by 4-5% a year, total earnings, which includes all other elements of wages like bonuses and overtime payments, will grow even faster.
The rapid expansion reinforced expectations that the European Central Bank will raise the base rate to 4.0% when it meets on June 6th.In South Africa higher interest rates loomed after inflation rose to 7.0% in the 12 months to April and targeted inflation (excluding mortgage costs) reached 6.3%, above the central bank's upper limit.
Since 1957, the Bundesbank has targeted inflation to prevent a repeat from ever happening - and was the first central bank to have full independence.
The new regime of targeted inflation and floating currencies was resilient, he argued.
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