IMF Seminar: Inflation Dynamics in a Fragile Global Economy
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DATE: April 22, 2022
DAY: Friday
10:30 AM - 11:30 AM
LOCATION: Virtual
Overview
What’s driving recent price spikes, and how long will high prices last? This session will delve into the ongoing surge in global inflation. Participants will discuss supply and demand factors and explore the persistence of rising price pressures. They will cover the impact of the war in Ukraine, the large increases in commodity prices - including food and energy - and the risk of inflation remaining elevated. The panel will also weigh in on how central banks can deliver on their price stability objective in such an environment, while protecting the ongoing recovery.Join the conversation via #inflation
IMF Seminar: Inflation Dynamics in a Fragile Global Economy
Event Summary
What’s driving the ongoing surge in global inflation, and how long will high prices last? The panelists discussed supply and demand factors, including the impact of the war in Ukraine, and explored the persistence of rising price pressures. The panel also weighed in on how central banks can deliver on their price stability mandate in the current environment, while protecting the ongoing recovery.
Key Points:
- Inflation path. The panel concurred that the current path of inflation was very unpredictable, but the upside risks, including from continued supply disruptions and the war in Ukraine, were significant.
- Impact of the war in Ukraine. Gopinath emphasized that ending the war would be the most beneficial outcome for the global economy. Noting that a protracted war could lead to further energy price increases due to potential additional sanctions imposed by Europe, including on Russia’s oil and gas, Gopinath said the war would further weigh on global growth. Nor Shamsiah noted that for many emerging markets and developing countries (EMDCs), including Malaysia, the impact of the war on inflation was much more limited than in the advanced economies. Continued supply chain disruptions and renewed rise in COVID cases, said Nor Shamsiah, are the main potential drivers of sustained inflation pressures in many EMDCs.
- Monetary policy. Rey noted that monetary policy tightening was necessary at this point, but emphasized the need to be mindful of potential overtightening, highlighting balance sheet risks. Bailey further underscored there is no one size fits all since each country faces different shocks and calibrate the policy response appropriately. Gopinath indicated the importance of central banks acting swiftly and maintaining good communication to ensure that inflation remains in check and expectations remain well anchored. Under current circumstances, it is instrumental for monetary policy to coordinate with other policies in staving off inflationary pressures, said Nor Shamsiah.
- Policy coordination. Gopinath and Rey saw fragmentation as a major risk, as individual economies becoming more inward looking could lead to further inflationary pressures. Gopinath underscored that in this context, policy coordination was becoming more important than ever. Bailey emphasized the importance of focusing on building resilience, including through maintaining a free international trading system while being careful of building new dependencies, which might become a challenge later.
Quotes:
“One of the clear messages I am getting from this [Spring Meetings] week is that we have to be very focused on resilience.” Andrew Bailey
“The best policy response, also for inflation, would be to end this war.” Gita Gopinath
“We need the tightening at this point, but we need to be very careful about the danger of overtightening.” Helene Rey
Panelists
Panelist: Gita Gopinath
Gita Gopinath is the First Deputy Managing Director of the International Monetary Fund (IMF). She oversees the work of staff, represents the Fund at multilateral forums, leads the Fund’s work on surveillance and related policies, and oversees research and flagship publications. Previously, Ms. Gopinath was the Fund's Chief Economist. In that role, she helmed thirteen releases of the World Economic Outlook. She also worked with other Fund departments on a new analytical approach to help countries respond to international capital flows via the Integrated Policy Framework. Prior to joining the IMF, Ms. Gopinath was the John Zwaanstra Professor of International Studies and of Economics at Harvard University and before that she was an assistant professor of economics at the University of Chicago’s Booth School of Business. Her research, which focuses on International Finance and Macroeconomics, is widely cited and has been published in many top economics journals. She has authored numerous articles on exchange rates, trade and investment, international financial crises, monetary policy, debt, and emerging market crises.
Panelist: Andrew Bailey
On 20 December 2019, Andrew Bailey was announced as the new Governor of the Bank of England.He began his term on 16 March 2020.
Andrew Bailey served as Chief Executive Officer of the Financial Conduct Authority (FCA) from 1 July 2016 until taking up the role of Governor. As CEO of the FCA, Andrew Bailey was also a member of the Prudential Regulation Committee, the Financial Policy Committee, and the Board of the Financial Conduct Authority.
Andrew previously held the role of Deputy Governor, Prudential Regulation and CEO of the PRA from 1 April 2013. While retaining his role as Executive Director ofthe Bank, Andrew joined the Financial Services Authority in April 2011 as Deputy Head of the Prudential Business Unit and Director of UK Banks and Building Societies. In July 2012, Andrew became Managing Director of the Prudential Business Unit, with responsibility for the prudential supervision of banks, investment banks and insurance companies. Andrew was appointed as a voting member of the interim Financial Policy Committee at its June 2012 meeting.
Previously, Andrew worked at the Bank in a number of areas, most recently as Executive Director for Banking Services and Chief Cashier, as well as Head of the Bank's Special Resolution Unit (SRU). Previous roles include Governor's Private Secretary, and Head of the International Economic Analysis Division in Monetary Analysis.