Jackson Hole: The tradeoffs facing global central bankers – between jobs, inflation and growth – likely to worsen in the coming years as the world struggles for perfect job markets and supply chains, and price pressures continue, Geeta GopinathThe First Deputy Managing Director of the International Monetary Fund told global policymakers on Friday.
Given the inherent risks of inflation, Gopinath said top central banks would need to be equally tough, despite the potential costs.
“Central banks must act decisively to get inflation back on target and stabilize inflation expectations,” he said at the Jackson Hole Central Banking Conference in Wyoming.
His remarks are part of how central bankers have been swiftly reset to their jobs, with many facing rapid price hikes for the first time in their careers.
Gopinath said policy approaches that seemed reasonable even a few months ago, such as running a “hot” economy to boost jobs and supply shocks would disappear, are no longer safe.
“The pandemic and (Ukraine) war have acted as a ‘stress test’ for the countries’ monetary policy framework,” Gopinath said.
If previous practice was to “view” supply problems on the assumption that businesses would adjust, “pandemics and wars suggest that temporary supply shocks can have a wider and more persistent effect on inflation when an economy is very strong, or The shocks are very large. In such circumstances, central banks may need to react more aggressively to control inflation,” he said.
Similarly, attempts to use loose monetary policy to gain strong job gains, “create significant inflationary risks,” Gopinath said. “Inflation pressures could become more intense as unemployment falls to lower levels, and key sectors face supply constraints. Difficulties in measuring economic slowdown make it difficult to tell when inflation will hit, but a warm The risks in the economy become very high.”
Gopinath’s remarks reflect the still-immediate effort between global central banks and economic institutions to understand the current outbreak of inflation and determine whether it is rooted in lasting changes to the economy resulting from the pandemic and the Russian invasion of Ukraine. Is.
For example, the Fed reworked its monetary policy only two years ago, with a greater emphasis on job benefits and a willingness to take on more risk with higher inflation.
This approach was based on a weak relationship between jobs and inflation that seemed valid in the years before the pandemic, but may change now.
As in other parts of the supply chain, the supply of workers can become more sluggish and inflationary.
“The number of workers, especially in high-contact areas, can be very difficult to predict in light of the turnaround in the pandemic,” Gopinath said. “Goods and services provided through global value chains may become more expensive or unavailable if countries severely restrict trade.”
Given the inherent risks of inflation, Gopinath said top central banks would need to be equally tough, despite the potential costs.
“Central banks must act decisively to get inflation back on target and stabilize inflation expectations,” he said at the Jackson Hole Central Banking Conference in Wyoming.
His remarks are part of how central bankers have been swiftly reset to their jobs, with many facing rapid price hikes for the first time in their careers.
Gopinath said policy approaches that seemed reasonable even a few months ago, such as running a “hot” economy to boost jobs and supply shocks would disappear, are no longer safe.
“The pandemic and (Ukraine) war have acted as a ‘stress test’ for the countries’ monetary policy framework,” Gopinath said.
If previous practice was to “view” supply problems on the assumption that businesses would adjust, “pandemics and wars suggest that temporary supply shocks can have a wider and more persistent effect on inflation when an economy is very strong, or The shocks are very large. In such circumstances, central banks may need to react more aggressively to control inflation,” he said.
Similarly, attempts to use loose monetary policy to gain strong job gains, “create significant inflationary risks,” Gopinath said. “Inflation pressures could become more intense as unemployment falls to lower levels, and key sectors face supply constraints. Difficulties in measuring economic slowdown make it difficult to tell when inflation will hit, but a warm The risks in the economy become very high.”
Gopinath’s remarks reflect the still-immediate effort between global central banks and economic institutions to understand the current outbreak of inflation and determine whether it is rooted in lasting changes to the economy resulting from the pandemic and the Russian invasion of Ukraine. Is.
For example, the Fed reworked its monetary policy only two years ago, with a greater emphasis on job benefits and a willingness to take on more risk with higher inflation.
This approach was based on a weak relationship between jobs and inflation that seemed valid in the years before the pandemic, but may change now.
As in other parts of the supply chain, the supply of workers can become more sluggish and inflationary.
“The number of workers, especially in high-contact areas, can be very difficult to predict in light of the turnaround in the pandemic,” Gopinath said. “Goods and services provided through global value chains may become more expensive or unavailable if countries severely restrict trade.”