Inflation Shocks and Policy Space

Explain how weather shocks such as El Niño can ripple through food inflation, fiscal balances, central-bank policy, and consumer expectations. Build a framework for judging when a central bank should keep rates high, cut cautiously, or wait for clearer signals. Include the role of expectations, commodity prices, exchange rates, and political pressure, then illustrate how a government can reduce vulnerability to climate-driven inflation over the long run.