26.09.2022  Economic developments in the current inflationary setting and the economic policy response* Fundación la Caixa. “Economy and Society” lecture series Pablo Hernández de Cos Governor  *iEnglish translation from the original in Spanish. Ladies and gentlemen, first allow me to thank Fundación la Caixa for inviting me to participate in this series of lectures entitled “Economy and Society”, which has become a benchmark for in-depth analysis of current affairs. Against the current backdrop of high inflation and considerable uncertainty over the economic outlook, tragically marked by Russia’s invasion of Ukraine, the first part of my address will focus on describing the Banco de España’s diagnosis of the economic situation and outlook. I will then analyse the monetary policy response of the European Central Bank (ECB) to this setting and some of its possible effects on the Spanish economy. Lastly, I would like to highlight the role that other economic policies can play in tackling the challenges we currently face. 1. The main determinants of the current economic outlook Inflationary pressures are proving particularly high and persistent, causing significant drops in real income Inflation has surged persistently worldwide, becoming one of the major determinants of economic developments. The reasons behind the rise in inflation are manifold and combine supply and demand-side factors, whose weights differ depending on the geographical area in question. These factors include high commodity prices on international markets, production bottlenecks affecting certain goods (due to supply-demand mismatches triggered by the lifting of pandemic restrictions) and shipping bottlenecks.
The Bank of Zambia is in the process of engaging the banks with a view to finding a solution to the high cost of banking which is often cited as the main hindrance to access to finance. I therefore appeal to all the banks operating in Zambia to critically assess the level of their charges and to continue playing the supportive role to development that they have in the past. In this regard, I am particularly pleased to make mention of the spirited efforts that Standard Chartered Bank continues to make in financing SME’s and Micro-finance. The experiences of many economies show that these sub sectors have the capacity to create a middle class and  BIS Review 163/2008  1  to emancipate both rural and urban dwellers from their poverty trap. Zambia has many promising entrepreneurs whose only constraint is affordable funding. As you explore the opportunities that this new venture will bring you, I urge you to focus on the customers who may appear small today, but could grow with the bank if they are given the right support. I wish you every success as you embark on this journey into North Western Province. 2  BIS Review 163/2008