BIS says inflation needs decisive central banks

In its 2022 annual economic report, the Bank for International Settlements has said that timely and decisive action by central banks is needed to restore low inflation.

The BIS says the global economy risks entering a new era of high inflation with the danger of stagflation as a result of disruptions from the pandemic, the war in Ukraine, soaring commodity prices and financial vulnerabilities.

According to the report, the priority for central banks is to restore low and stable inflation but that a repeat of the 1970s stagflation is unlikely due to improved monetary policy and less reliance on energy. The key for central banks is to act quickly and decisively before inflation becomes entrenched. If it does, the costs of bringing it back under control will be higher.