Upward price pressure likely to persist inflation The governor of the Bank for International Settlements warned that it is at the highest level in more than 30 years in many countries and creates long-term problems for central banks.

Agustín Carstens, General Manager untilThe central bank’s umbrella agency pointed to a “new era of inflation” amid signs that consumer and business price expectations are “disengaging” from historically low levels.

Rising expectations could fuel inflation as companies pass on higher costs to customers and workers demand higher wages, Carstens said, noting the increased risk of a “dangerous wage price spiral”.

“In advanced economies, at least in advanced economies, a generation of societies, workers and business managers who have never seen meaningful inflation, are recognizing that rapid price increases are more than just history,” Carstens said in a speech in Geneva on Tuesday. the contents of the book.”

“The structural factors that have kept inflation low in recent decades are likely to weaken as globalization Retreat,” he added. “The pandemic, along with the changing geopolitical landscape, has started to make companies rethink the risks involved in large global value chains. “

Russian invasion of Ukraine increases interrupt The prices of food, energy and other commodities in supply chains caused by the pandemic have risen sharply since the war began on February 24. “This increase will directly push up consumer prices,” he said. “Other metals, such as metals, will further extend global value chains.”

He also said easy monetary policy and a generous fiscal package had fueled the latest “surge” in consumer prices, adding: “The policy setting could be a springboard for rapid expansion, at least over the past year.”

Consumer prices in the world’s 30 richest countries rose at an annual rate of 7.7 percent in February, up from 1.7 percent in the same month last year and the latest level since December 1990. OECD data Show Tuesday.

Nearly 60 percent of advanced economies have inflation above 5 percent — the highest rate since the 1980s — while more than half of developed economies have inflation, Carstens said. emerging market countries Inflation is over 7% – the highest level since the brief period of the global financial crisis in 2008.

“The forces behind high inflation are likely to persist for some time,” said the head of the Bank for International Settlements. “Central banks will need to adjust, as some are already doing. . . no one wants to repeat the mistakes of the 1970s,” when advanced economies were hit by persistently high inflation.

Several central banks around the world, including the U.S., U.K., Canada, Brazil, South Korea, Mexico and South Africa, have begun raising interest rates to combat inflation well above their 2 percent target.

“Adjusting to higher rates is not easy,” Carstens said, noting that households, companies, investors and governments “have become overly accustomed to low interest rates and easy financial conditions, which is also reflected in the fact that private and public debt is at a premium. historical high”.

“It will be a challenge to design a transition to more normal levels, and in the process set realistic expectations about what monetary policy can achieve,” he said. “The required shift in central bank behavior would also not be welcome.”

Rather than relying on monetary and fiscal policy to prop up growth, Carstens called for “structural policies that strengthen the productive capacity of the economy.”

“Many of the economic challenges we face today stem from the neglect of supply-side policies over the past decade or more,” he said. “In the past decade, central banks have done more than they should. Now is the time for other policies to take over.”