Monetary policy during periods of economic difficulty

Reflections from Berlin: Navigating Monetary Policy Amid Uncertainty

Sending regards from Berlin, a city renowned for its commitment to price stability. Today, I want to discuss how monetary policy adapts during challenging times. The global geopolitical landscape has shifted, suggesting that disruptions to supply and sudden changes in prices are likely to become more common and, at times, quite intense. As a result, central banks around the world may find it increasingly challenging—if not unfeasible—to maintain consistent inflation rates in the coming years. Ignoring this reality could only damage their trustworthiness. Achieving stable inflation remains the cornerstone of inflation targeting and is essential for its effectiveness, given how inflation expectations are shaped.