The first is, do the current economic conditions simply call for central banks to revert to the past? In other words, as in the pre-GFC days, should they focus on the primary objective of maintaining price stability? My second question is, once this current inflation eases, will we see a return to the pre-COVID trend of low growth and low inflation?
[2] As central banks took up the fight against spiralling inflation in the late 1970s and early 1980s, they brought down and stabilised inflation expectations at levels that provided a solid nominal anchor for firms and households.