Inflation is back, challenging central banks

Speech by Mr Agustín Carstens, General Manager of the BIS, on the occasion of the Bank's Annual General Meeting, Basel, 26 June 2022.

BIS speech  | 
26 June 2022
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 |  6 pages
26 Jun 2022 BIS Annual General Meeting, Basel

Agustín Carstens outlines the challenges for central banks with the return of inflation. Read more in our Annual Economic Report.

The most urgent and important task for central banks worldwide today is to fight high inflation. Persistently high inflation poses the risks of switching to a high-inflation era. Such risks tend to be self-reinforcing. And the signs are flashing red. Central banks need to bring inflation down before it becomes entrenched. In doing so, they need to limit the adverse effects on economic activity and safeguard financial stability. Lessons of the 1970s and other episodes show that shorter and front-loaded tightening tends to make soft landings more likely. At the same time, revitalising long-term growth is critical. It calls for relying less on demand-led growth and emphasising more growth-friendly fiscal actions and structural reforms. As central banks hit the brakes and steer in the right direction, other policymakers need to pave the road for the travel ahead.