This may, in turn, affect inflation expectations and give rise to second round effects that must inevitably be countered with more restrictive monetary policy measures. Therefore, the crucial question that central banks are facing today is what the most appropriate conduct of monetary policy should be in these complex and highly uncertain times.
A recent OECD Report called this the “Double Dividend” of structural reforms: they increase growth, and if implemented properly, decrease inequality. To sum up, overcoming the political challenges to adjustment is fundamentally about communication.