After rising steadily for months, on Dec 10, the US government announced that inflation for November hit 6.8% — the highest in four decades — and sounded a louder warning for other economies whose health remains tied to the world’s largest.

From the perspective of Insead’s professor Pushan Dutt, the effective way to fight inflation is to hike rates quickly and not take a gradual approach over a longer period of time. This is because changes in the interest rates can only be felt by the real economy in six to 12 months’ time, while the economic cost of higher rates continues to weigh.

“The only way to accelerate the impact is to have a substantial increase in interest rates, but then you bring the interest rates back down,” says Dutt, the business school’s professor of economics and political science. He was speaking at a recent investment forum, Investival, organised by The Edge Singapore.

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