The Center for Market Education (CME) said the additional money supply created by expansive fiscal policies has worsened the risks of inflation and potentially threatens the country’s economic recovery.

CME chief executive officer Carmelo Ferlito, speaking before the tabling of Budget 2022, said the lockdowns have caused the supply-side shocks to increase transport and commodity prices.

September’s inflation rate of 2.2% was an increase from 2.0% in August and a sharp rise from 0.66% in 2019.

Meanwhile, CME fellow John Hearn said the government should balance its fiscal budget by cutting back on expenditures for the next few years.

He said central banks and governments in most countries mislead people into thinking that higher inflation is caused by supply-side problems such as energy price rises and supply chain difficulties.

“This is wrong as the current inflation is the result of government overspending and monetary mismanagement. Supply-side shocks are not enough to generate generalised inflation. However, increased money supply is,” he said.

He said central banks need to slow the growth in money supply – and manage monetary demand to grow a little faster than output – to achieve their inflation target.