• The era of low interest rates and moderate inflation has come to an end.
•  The pandemic and Ukraine conflict are undoing the effects of more than a decade of ultra-low inflation in the majority of industrialised economies.
•  They warned that the fragmentation of the global economy posed a threat to supply chains, productivity, costs, and growth.

Following the “huge geopolitical shock” caused by Russia’s invasion of Ukraine and the coronavirus pandemic, the world’s top central bankers have warned that the era of low interest rates and moderate inflation has come to an end.

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Christine Lagarde, president of the European Central Bank, Jay Powell, chairman of the Federal Reserve, and Andrew Bailey, governor of the Bank of England, all advocated for swift action to reduce inflation at the annual meeting of the European Central Bank.

They stated that if interest rates are not raised soon enough, rising inflation could become entrenched, necessitating more dramatic action by central banks to return price increases to more sustainable levels.

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“The process is likely to involve some discomfort, but the greatest discomfort would result from failing to confront this high inflation and allowing it to endure,” said Powell.

The central bank chiefs stated in Sintra, Portugal, that the pandemic and the Ukraine conflict were undoing the effects of a number of variables that had contributed to more than a decade of ultra-low inflation in the majority of industrialised economies. They cautioned that the fragmentation of the global economy into competing blocs posed a threat to supply chains, productivity, costs, and growth.