BIS central bankers’ speeches  7  Conclusion While I have tried to unravel the inflation puzzle and provide some explanation why inflation remained entrenched despite output gap being negative, we know that sustained level of high inflation is bad for the economy as it imposes real costs which are borne disproportionately by the different segments of the economy.
In order to bring inflation down on an enduring basis and anchor inflation expectations there is a need for policy action on several fronts. 8  BIS central bankers’ speeches  First, it is important to aim for nutritional security not only to harness the demographic dividend stemming from our sizeable young population but also to contain food prices.