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Because markets, central banks, and governments move at different speeds—and sometimes in different directions—mistimed policy responses to major shocks can exacerbate, rather than mitigate, the depth and duration of a crisis. Fortunately, if this major lesson from the 1970s is heeded, the risk can be managed.

LONDON—There is a moment in every supply shock when the market’s fear of inflation gives way to anxiety about economic growth. This shift is one of the most important—and dangerous—signals for policymakers because markets, central banks, and governments move at different speeds, and sometimes in different directions.