Negative shocks impact on inflation to be more constant – ECB’s Lane
European Central Bank (ECB) Chief Economist Philip Lane said on Friday that monetary policy strategy review, even if it’s unavoidably delayed by COVID-19 outbreak, remains a high priority for ECB.
Lane added average rates of inflation both in advanced and emerging economies, have fallen and shown lower volatility in recent decades. “In a world of low inflation and low-interest rates it is plausible that the impact of negative shocks on observed inflation is likely to be more persistent,” said Lane and added that economic and financial globalization influences inflation outcomes through several mechanisms.
One is through “enhanced trade linkages and higher cross-border knowledge flows,” second is financial globalization that also, says Lane, contributes to greater similarity in inflation dynamics. The third factor that affects inflation dynamics is international migration flows.
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