But central banks are beginning to raise interest rates anyway.. Turkey, perhaps the only big economy that is obviously overheating, the central bank—which has been browbeaten by the president, Recep Tayyip Erdogan, who believes high interest rates cause inflation—opted on October 26th to keep interest rates on hold... three elements: the price of imports; the public’s expectations; and capacity pressures (or “slack”) in the domestic economy. Start with imported inflation, which is determined by the balance of supply and demand in globally traded goods, such as commodities, as well as shifts in exchange rates. Commodity prices have picked up smartly from their nadir in early 2016. The oil price, which fell below $30 a barrel then, has risen above $60... Leave aside the transient effects of import prices, and inflation becomes a tug-of-war between expectations and a third big influence, the amount of slack in the economy... As the economy approaches full employment, the scarcity of workers ought to put upward pressure on wages, which companies then pass on in higher prices. On some measures, Japan’s labour market is as tight as it has been since the 1970s. America’s jobless rate, at 4.2%, is the lowest for over 16 years. Inflation has nevertheless been surprisingly weak... the trade-off between unemployment and inflation, known as the Phillips curve, has become less steep... a drop in the unemployment rate in America has less than a third as much power to raise inflation as it did in the mid-1970s... the flatter Phillips curve suggests that the cost for central banks in higher inflation of delaying interest-rate rises is rather low.