Over the summer a wild hope took hold among investors. Inflation seemed to be falling gently even as America’s economy stayed in rude health. Perhaps the worst bout of inflation since the 1980s would be easily quelled, without interest rates rising much further or much economic pain. Now the dream has been dashed. Figures published on September 13th show that the pace of underlying inflation in August was fast and furious. Stockmarkets fell by the most since the early months of the pandemic; the price of junk bonds dropped; and short-term Treasury yields spiked. America still has an inflation problem. To fix it, the Federal Reserve must go big...

The Fed’s job is to set interest rates so that inflation reaches its target. With the economy still overheating, its work is far from done. Although the central bank has raised interest rates faster than in past tightening cycles, it has been so far behind the curve that every reminder of inflation’s stickiness is jolting markets—the opposite of what good monetary policy is supposed to achieve.

Rather than continuing the cycle of tardiness and surprises the Fed should act in bigger increments, by bringing forward to this year the interest-rate rises it had planned for 2023. The odds that a painful recession can be averted, meanwhile, look woefully long. Only in the rosiest of worlds will a mild rise in unemployment suffice to slow down price rises substantially. The worst of the fight to tame inflation is yet to come.