Inflation and the path to a soft landing

Remarks by Mr Hyun Song Shin, Economic Adviser and Head of Research of the BIS, at the G20 High-level Seminar "Monetary and financial sector policy to support stability and recovery", 17 July 2022.

Looking at the demand and supply sides of the economy in a balanced way is essential in addressing the current inflation challenge and determining the odds of a soft landing for the global economy. The key question is whether central banks can achieve a soft landing by bringing inflation down without causing a recession. If we compare today's circumstances with past tightening cycles, we find a mixed scorecard on the possibility for a soft landing, although front-loaded rate hikes have historically been more likely to result in soft landings. Authorities should put in place policy frameworks to meet the challenges arising from global financial conditions, which are more pronounced for emerging market economies than for advanced economies. Such frameworks can help keep vulnerabilities from building up, and build policy buffers to draw on in times of stress.