"Is inflation here to stay?" And "Is inflation dead or hibernating?" 2022 And 2020 Speeches by Claudio Borio, Head of the Monetary and Economic Department of the Bank for International Settlements (BIS)

"Is inflation here to stay?"
Speech by Mr Claudio Borio, Head of the Monetary and Economic Department of the BIS, at the Barclays 26th Annual Global Inflation Conference, 25 January 2022.

About a year ago I asked the question: is inflation dead or hibernating? The answer then was that it was merely in hibernation and today I think it's safe to say that this was the right call. But as I revisit the question today, the answer is more complex than one might think. In the short run, things clearly turned out quite differently than I and many others had expected, with higher and more persistent inflation taking hold in many economies. There are grounds for optimism, though, as the pandemic's bottleneck effects will dissipate at some point, secular disinflationary effects remain in place and central banks are there to prevent uncomfortably high inflation from becoming entrenched. But in the longer term, inflation could become a problem again if underlying economic conditions and policy regimes came to resemble those in the 1970s more: a deglobalised world; high public debt; financial repression; highly constrained central bank autonomy; and a larger role of the state in the economy.

"Is inflation dead or hibernating?"
Speech by Mr Claudio Borio, Head of the Monetary and Economic Department of the BIS, at the Barclays 24th Annual Global Inflation Conference, 5 October 2020.

Is inflation dead or hibernating? The answer will shape the future of central banking and the global economy. It requires exploring shifts in the tectonic plates of the global economy rather than developments on its surface, ie shifts in secular forces and policy regimes. Looking back, obviously central banks have been instrumental in taming the Great Inflation of the 1970s. But this cannot be the whole story: post-Great Financial Crisis, inflation has remained stubbornly below targets despite major efforts to push it up. Inflation has been very insensitive to economic slack, and inflation expectations appear to be rather backward-looking. Arguably, secular forces such as globalisation and technology have played an important complementary role. Looking forward, in the wake of the pandemic, disinflationary forces are likely to prevail in the near term, owing to excess capacity and the continued impact of the secular forces. But at some point inflation could become a problem again, if underlying economic conditions and policy regimes came to resemble more those in the 1970s: a deglobalised world; high public debt; financial repression; highly constrained central bank autonomy; and a larger role of the state in the economy. If so, the winter of hibernation will have been quite long, but just a winter nonetheless.