Catherine Mann, a policymaker at the Bank of England, has raised concerns about the fragmentation of the global economy and its potential impact on inflation shocks in the future. She spoke about this issue at an International Monetary Fund conference, where she emphasized the end of what was known as the “great moderation” – a period characterized by stable inflation and low volatility. Mann argued that central banks will need to be more active in exercising their independence to navigate the new economic landscape.
Mann highlighted global integration as a key factor contributing to stable inflation rates in past years. However, she warned that with ongoing fragmentation of trade and capital flows, both emerging market and advanced economies are facing challenges. This shift is likely to result in lower potential growth rates for economies, creating inflationary pressures that central banks will need to address.
Furthermore, Mann pointed out the risks and uncertainties associated with decreasing trade and finance due to disengagement rather than reformation into distinct economic blocs. She expressed concerns about moving towards more localized supply chains, highlighting the significant trade-offs involved.
In conclusion, Mann’s remarks underscored the complexities and challenges that central banks face in navigating the evolving global economic landscape. Central banks must maintain high levels of vigilance while managing increasing inflation volatility and adapting to changing dynamics of global economy to ensure stability and growth.