Rooting out high inflation will become much harder
Speaking at the annual gathering of central bankers in Jackson Hole, Wyoming, many said that the global economy was entering a new and tougher era.
“At least over the next five years, monetary policymaking is going to be much more challenging than it was in the two decades before the pandemic struck,” Gita Gopinath, the IMF’s deputy managing director, told the Financial Times.
Cutting through the buoyant atmosphere among Jackson Hole attendees was the overarching concern that the world and the economic relationships that underpin it had fundamentally changed.
Complicating matters are doubts about just how much policy tightening is needed in the face of unpredictable gyrations in supply and, in turn, prices.
The next few years are at risk of being known as the “Great Volatility” — in contrast with the past two decades, which economists called the “Great Moderation”
The 2 per cent inflation target came up repeatedly throughout the conference, with economists suggesting that it may need to be adapted to fit a more fractured global economy.
Fed in 2020 announced it would target inflation at a 2 per cent average over time, in order to make up for past periods of undershooting the target.
Many economists advocated for a 3 per cent inflation target.
FT 28 August 2022
https://www.ft.com/content/b71e259f-f2f0-4e25-bd22-0dbd0f344643
From Great Moderation to Great Stagflation
https://englundmacro.blogspot.com/2022/08/from-great-moderation-to-great.html
Should the somewhat arbitrary goal of 2% be changed?
The question may seem a little churlish when central banks are so flagrantly missing their existing target
The relative damage done by extremely high or accelerating price growth may be easily visible, but economists have struggled to identify differences in the costs to an economy from different stable, low-single-digit inflation rates.
Higher inflation targets are a different solution to the problem of the lower bound. If the public expects the central bank to generate more inflation in future then the interest rate, in real terms, can still be sharply negative, stimulating the economy even without nominal interest rates needing to venture below zero.
Allowing moderately higher inflation in normal times could therefore make it easier for the central bank to give a boost to the economy when trouble hits.
The Economist 21 July 2022
Det har väckt viss uppmärksamhet att han - IMFs chefsekonom, Olivier Blanchard - har föreslagit att inflationsmålet bör höjas, från runt två till kanske runt fyra procent.
Han har fått stöd av Krugman medan The Economist vacklar.
https://englundmacro.blogspot.com/2010/02/riktiga-karlar-ar-inte-radda-for-lite.html
Kommentarer