Pablo Hernández de Cos: Inflation - recent developments, outlook and monetary policy implications

Speech by Mr Pablo Hernández de Cos, Governor of the Bank of Spain and Chair of the Basel Committee on Banking Supervision, at the XII Encuentro Financiero (Financial Sector Meeting), organised by Expansión and KPMG, Madrid, 29 November 2021.

The views expressed in this speech are those of the speaker and not the view of the BIS.

I should like, first, to express my gratitude for the invitation to participate once again in this event, attended each year by the senior managers of the main financial institutions in Spain.

On this occasion, I would like to take the opportunity of this closing session to address the question of recent inflation developments. This is a subject that has, over the course of the year, attracted increasing attention from those of us having some responsibility for economic policy, the media and also the general public, not only in Spain, but also worldwide. This should come as no surprise, when we consider that the harmonised index of consumer prices in the euro area had not reached October's level of 4.1% year-on-year since 2008, while in Spain the 5.4% rate recorded was the highest since September 1992. Globally, the increase has been most striking in the United States, where the 6.2% rate recorded amounts to the largest increase in consumer prices since December 1990.

Accordingly, the interest in analysis of the extent and characteristics of this rise in inflation is fully justified. We are all well aware of the undesirable consequences of persistently high inflation, such as the distortion of resource allocation in the economy and the effects on the income and wealth of different groups of agents.