Kristin Forbes, Jongrim Ha, M. Ayhan Kose
By some criteria, the post-pandemic disinflation was a triumph for central banks in advanced economies: inflation fell sharply from 40-year highs while unemployment rates remained low, the combination of which generated historically low sacrifice ratios (output losses per inflation reduction). These standard metrics for success, however, ignore adjustments in the price level, which rose by more after the pandemic than over the past four decades. This column discusses lessons learned from the ‘start late and then sprint’ strategy for tightening monetary policy during this period, highlighting why the price level should receive more weight when central banks evaluate strategies for responding to inflation shocks – such as new tariffs – in the future.
Πηγή: Voxeu