Indeed, sometimes the same person is worried about both! These risks sit at the extremes of the distribution of what’s possible. I’ll address each of them in turn. 2  BIS central bankers’ speeches  Runaway inflation Let’s talk first about the risk of runaway inflation. This happened 40 years ago here in Canada and in most advanced economies.
Prices spiralled up, economic growth was weak and unemployment was rising. Inflation got away from us. People’s expectations of future inflation became unanchored, pushing up actual inflation. Interest rates were also high, but savings were eroded by the high inflation. When the Bank of Canada finally made a determined effort to bring inflation back under control, our economy went through a major recession.