The end of inflation targeting?

Central banks in OECD countries are faced with a “triple war economy”, given: COVID, with the collapse of production; The war in Ukraine, with the need to increase much public spending (defence, support for purchasing power, reshoring); The energy transition, which will require the destruction of existing capital and its replacement with new capital. This “war economy” began in 2020 and will last a long time, given the lengthy duration of the energy transition. In a war economy, monetary policy aims to facilitate the financing of the necessary public spending by keeping interest rates low and through partial monetary financing of public spending. To be sure, central banks will have to act against inflation, but this objective will remain secondary to that of giving governments the means to make the necessary war economy spending. This therefore spells an end to inflation targeting. But money creation can remain reasonable and fiscal policy can be adjusted to prevent hyperinflation.