MNI: Central Banks Less Able To 'Look Through' CPI Bumps- BIS
Deputy General Manager Andrea Maechler says inflation may become more volatile.
Central banks can’t return to their past habit of "looking through" many inflation bumps with the global economy more prone to volatility from supply shocks, a top BIS official said Wednesday.
"Circumstances may require central banks to lean more forcefully against inflation to contain the risk of transitioning to a high-inflation regime," Andrea Maechler, Deputy General Manager of the Bank for International Settlements, said in the text of a speech at the London School of Economics. "We also need to be mindful that monetary policy cannot shield the economy from adverse supply shocks that lower potential output."
The Federal Reserve and other central banks were burned in the pandemic recovery when officials called quickening inflation “transitory” and were then pressed into some of the toughest tightening campaigns in decades. Inflation could become more volatile in coming years, Maechler said, citing increased risks from geopolitics and climate change.
"This at a time when economic headwinds such as high and rising debt levels, the ongoing decline in working age populations and slowing globalisation are making the global economy less agile and less resilient."