Members ofthe Bank of England's MonetaryPolicy Committee will have to decide whether the dominant effectofthe energy price rise is to reduce demand from the economy, so that the long term prospects for inflation returning to target are improved, or to dangerously increase underlying inflationary pressures.
Argentina's inflexible currency-board scheme not only pegs the peso at par to the dollar but limits the money supply to the level of hard-currency reserves, in effect turning monetarypolicy over to the United States' Federal Reserve.
Some central banks, slow to grasp theeffectof these structural changes on inflation and monetarypolicy, have been running overly loose policies that have fuelled unsustainable booms in America and some other economies.
Inflation was believed to be driven largely by non-monetary factors, and most people believed that if you tried to control inflation using monetarypolicy, the primary effect would be to throw a lot of people out of work.