Luigi Federico Signorini: Inflation, inflation expectations, and policy - new perspectives

Welcome address by Mr Luigi Federico Signorini, Senior Deputy Governor of the Bank of Italy, at the 2024 Bank of Italy-SUERF Conference "Inflation, inflation expectations, and policy - new perspectives", Rome, 18 November 2024.

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

Ladies and gentlemen,

Naturally enough, people's perception of, and expectations about, the inflation rate have attracted much attention in the past few years.*

When the Bank of Italy last hosted a conference on inflation expectations two years ago, inflation had surged in many countries to levels not seen in half a century. This was in sharp contrast to a previous era during which inflation had long remained below target, and monetary policy had been very loose. Starting in early 2021, the picture had changed. The recovery from the pandemic shock, supply chain disruptions, and then – most critically – Russia's attack on Ukraine sparked sizable increases in key input prices, which quickly passed through to consumer prices.

For central banks, whose core mandate is price stability, that was a once-in-a-generation challenge. Spikes in global energy and commodity prices could not be neutralised by monetary policy, of course. What we needed to do was to ensure that those price changes did not ignite an inflationary spiral which would then be difficult and costly to stop. Monetary policy had to change course fast. The risk of inflation expectations de-anchoring and the risk of second-round effects had to be tackled forcefully.

In this framework, the perceptions and attitudes of price- and wage-setters were a key link, and obtaining reliable information about them was therefore important. Over time, this has spawned much thinking about the way people form views about inflation and the channels through which such views affect their behaviour. There has also been a renewed interest in data collection. Thus, one legacy of the inflationary episode of the past few years has been a growing body of research, as well as a rich agenda for future work. Today's conference fits nicely in this trend.