It has been a debate about the nature of global inflation
since 2021, coming from the Covid-related production disruptions in global
value chains /Martin Sandbu, FT, Opinion 20 April 2022/.
By now, more and more politicians and central bankers start to recognize the similar patterns between the 1970s and the 2020s, even between the 1940s and the 2020s.
All the calamities started to show up in 2020 will continue, as the historical patterns are unfolding and getting stronger and stronger.
It definitely means that credit, capital, labour, knowledge, information, data and all other essential resources must move from one sector to another. Indeed, the faster the better.
Higher interest rates and tougher monetary policies will support this transitions because they push governments and central banks to launch joint targeted policies, credit lines and tax incentives for future winners.
Central bankers should consider higher global inflation as permanent in our decade, so they must not ease off the brakes. In the meantime, they can initiate targeted programs hand in hand with their governments with preferential terms for green, digital and sustainable projects.
Governor Matolcsy, MNB, the Central Bank of Hungary