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.