The return of inflation in the advanced countries came as a surprise. At first, it was seen as a temporary phenomenon to avoid taking decisions that might slow down the rebound in activity. But we can no longer allow a drift that risks becoming more pronounced and affecting the functioning of economies in the long term.
To do this, we must first examine the mechanisms that are at the origin of this instability and are capable of maintaining it. They undoubtedly differ from one country to another, but overall it is considered that supply-side disturbances (blockages in supply chains, loss of skills in certain activities, raw material prices, etc.) have played a major role, often aggravated by excessive
stimulation of demand.
The question is which policies are best suited to address these imbalances. In recent decades, monetary policies have been entrusted with the task of ensuring price stability. But are they effective in managing present and future supply shocks? Or can we believe in the possibility of virtuous co-ordination between fiscal policies that cushion these shocks and monetary policies that limit the cost to public finances?
HSBC Continental Europe
Institute of New Structural Economics, Université de Pékin
Banque des Règlements Internationaux (BIS)
Banque centrale européenne