Howard Schneider
Jackson Hole, Wyoming. (Reuters) – Global central bankers’ trade-offs between jobs, inflation and growth are likely to get worse in coming years, as the world’s first vice-president of the International Monetary Fund, Gita Gopi, said on Friday. Nath told policymakers around the world that price pressures persist amid efforts to correct job markets and supply chains. Said that despite the possible cost, top central banks still need to take a consistent hawkish stance.
“The central bank must act decisively to bring inflation back to target and anchor inflation expectations,” she said at the Jackson Hole central bank conference in Wyoming.
Her remarks are part of a rapid reset in how central bank workers are handling jobs, with many facing rapid price increases for the first time in their careers.
Policy approaches that seemed plausible a few months ago, such as running the economy to “warm” the economy to increase employment and assuming the supply shock would disappear, no longer seem safe, Gopinath said.
“The pandemic and the (Ukrainian) war have become countries’ ‘stress test’ monetary policy framework,” Gopinath said. When the economy is very strong or the shock is very large, the impact on inflation is even greater Persistent. In this case, the central bank may need to take a more aggressive response to control inflation,” she said.
Likewise, the use of easy monetary policy to generate greater employment “creates significant inflation risks.” “As unemployment falls to low levels, inflationary pressures are likely to grow and key industries face supply constraints,” Gopinath said. The difficulty of measuring economic weakness makes it difficult to tell exactly when inflation will take a hit, but Risks increase significantly in a hot economy. “
‘Unpredictable’
Gopinath’s remarks reflect the ongoing urgent efforts of central banks and economic institutions around the world to understand the current burst of inflation and determine whether it is Originating from permanent changes in the economy triggered by the pandemic and Russia’s invasion of Ukraine.
For example, only two years ago, the Federal Reserve reworked monetary policy with a greater emphasis on job growth, and in the case of rising inflation willingness to take more risk.
This approach, based on the weak relationship between jobs and inflation, seemed to work a few years before the pandemic, but may have changed now.
As with the rest of the supply chain, the supply of workers may become more sluggish and inflationary.
“The number of workers, especially in High continuity The behavioural sector may become more unpredictable given changes in the pandemic,” Gopinath said. “Goods and services provided through global value chains may become more expensive or unavailable if countries severely restrict trade. . ”
