In the wake of the global economic fragmentation, Bank of England policymaker Catherine Mann voiced concerns about the future of stable inflation and low volatility. Speaking at the International Monetary Fund, Mann emphasized that countries will be more exposed to inflation shocks due to this shift.
Mann highlighted how global integration played a significant role in maintaining stable inflation rates in the past. However, with ongoing disruption of trade and capital flows, both emerging market and advanced economies are facing challenges that could lead to lower potential growth rates. This shift is creating inflationary pressures that central banks will need to address.
The changing global economy has led to a decrease in trade and finance, with countries experiencing disengagement rather than reformation into distinct economic blocs. Mann warned about the risks and consequences of this trend, emphasizing the volatility and uncertainties it brings. She also expressed concerns about moving towards more localized supply chains, highlighting the significant trade-offs involved.
Overall, 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, manage increasing inflation volatility, and adapt to changing dynamics to ensure stability and growth.