US lettuce prices fell 16.4 per cent in July, a clear signal of why the consumer prices index slipped to 3.4 per cent year‑on‑year, with core inflation easing from 2.5 to 2.4 per cent. Kevin Warsh may now argue that trimmed leaves are his preferred inflation gauge, but the data suggest the Fed could avoid a rate rise by year‑end. Central banks’ limited toolkit—primarily interest rates—struggles with today’s frequent negative supply shocks. ECB president Christine Lagarde calls this the “most difficult dilemma” because supply shocks push inflation and growth in opposite directions, turning policy “more of an art than a science,” as Isabel Schnabel notes. The conventional response is to “look through” temporary shocks, yet Jeff Currie reminds us “you can’t print molecules.” Biagio Bossone stresses that governments must shoulder energy, food, and labor shortages, while central banks protect credibility. With climate change and geopolitical fragmentation accelerating structural supply disruptions, the debate is shifting toward fiscal‑monetary cooperation and a modernized toolkit.

Central banks now face a dual challenge: inflation driven by real supply constraints versus the need to sustain growth. Their traditional lever—interest rates—operates through a long transmission lag, making it ill‑suited for rapid, supply‑side shocks. The ECB’s strategy review acknowledges that geopolitical, climate, energy, and trade shocks are becoming routine, requiring policymakers to weigh inflation impulses against growth headwinds. This balancing act forces a move from rigid rule‑based policy to a more discretionary, context‑aware approach, where credibility is maintained but direct interventions in critical markets become increasingly necessary.

The art of modern monetary policy now demands greater coordination with fiscal authorities. Targeted energy support, strategic reserves, and supply‑chain resilience measures can alleviate price pressures where rates cannot. As Biagio Bossone argues, central banks should focus on preserving credibility while governments tackle shortages directly. Updating the institutional architecture for an era of frequent supply shocks is no longer optional; it is essential for price stability and sustainable growth.