Catherine Mann, a Bank of England policymaker, has expressed concerns about the fragmenting global economy and its potential impact on inflation shocks in the future. She spoke at the International Monetary Fund and emphasized that central banks will need to be more active in exercising their independence to navigate the new economic landscape.
Mann highlighted the importance of global integration as a factor contributing to stable inflation in the past. However, with ongoing fragmentation of trade and capital flows, both emerging market and advanced economies are facing challenges. This shift will likely result in lower potential growth rates for economies, creating inflationary pressures that central banks will need to address.
The changing global economy is leading to a decrease in trade and finance, with countries experiencing disengagement rather than reformation into distinct economic blocs. Mann pointed out the potential risks and consequences of this trend, emphasizing the volatility and uncertainties it brings. She expressed concerns about the consequences of moving towards more localized supply chains, highlighting the significant trade-offs involved.
Overall, Mann’s remarks underscore the complexities and challenges that central banks will face in the evolving global economic landscape. Central banks will need to maintain high levels of vigilance, manage increasing inflation volatility, and adapt to changing dynamics of global trade and finance to ensure stability and growth for their economies.
