Monetary Policy Responses to the Post-Pandemic Inflation

Edited by William B. English, Kristin Forbes and à ngel Ubide

in CEPR Press Books from Centre for Economic Policy Research

Abstract: Demand rebounded more rapidly than expected after the COVID pandemic. This interacted with a series of unprecedented supply-side shocks around the shutdown and reopening of economies, along with broad-based increases in commodity prices following the invasion of Ukraine. Inflation spiked to the highest level in decades. In response, central banks tightened monetary policy sharply. This book explores the commonalities and differences in countries’ strategies, as well as lessons for the next inflationary episode. The first two sections of the book summarise the responses by fifteen central banks from advanced and emerging economies, with chapters written by senior central bank officials and economists. Emerging market central banks were the first to raise rates in response to high inflation; they were more concerned about maintaining credibility and less constrained by asset purchase programmes and forward guidance. By contrast, advanced economy central banks were slower to adjust policy; they were more confident in the anchoring of inflation expectations and initially more constrained by earlier policy communication. As it became clear inflation would be much higher and for much longer than forecast, with risks of becoming embedded in wage and price setting, central banks responded more aggressively. They raised rates quickly, in large increments, and to the highest levels in many years, often combined with steps to shrink their balance sheets. The final section of the book includes cross-country thematic chapters addressing broader issues around this high-inflation episode: the causes of the inflation spike, the interactions with labour markets, the role of energy shocks and energy policy, and the financial market responses. The final chapters discuss the implications for financial stability, international financial regulation, and monetary policy frameworks. This comprehensive overview of the monetary policy responses to the post-pandemic inflation provides a unique reference for scholars, teachers, policymakers, and investors seeking to understand and draw lessons from this tumultuous period.

Date: 2024 Written 2024-02
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Chapters in this book:

Analysing the inflation burst in eleven economies

Ben S Bernanke and Olivier Blanchard

Bank Indonesia’s responses to the post-pandemic period of high inflation: Synergy and innovation to promote recovery and resilie

Perry Warjiyo

Central bank responses to the post‑COVID period of high inflation: The case of Australia

Renee Fry-McKibbin and Carolyn Wilkins

COVID-19 and post-pandemic challenges: High inflation and labour markets

Cassandra Castle and Clare Lombardelli

Financial stability and the transition to tighter financial conditions

Klaas H. W. Knot

Implications for the Federal Reserve’s monetary policy framework in the future

Charles L. Evans

Macro-financial challenges in the post‑COVID world

Claudio Borio

Monetary policy in Chile through inflation and disinflation, 2021 to 2024

Elias Albagli and Pablo Garcia

Monetary Policy Responses to the Post-Pandemic Inflation: Introduction

William B. English, Kristin Forbes and à ngel Ubide

Quelling the post-pandemic inflation surge: The Indian experience

Michael Debabrata Patra and Binod B Bhoi

The 2021-2022 inflation surges and monetary policy in the euro area

Philip Lane

The Bank of Canada’s response to post-COVID inflation, and some lessons learned

Tiff Macklem

The Bank of Japan's monetary policy in response to surging global inflation

Shinichi Uchida

The Bank of Korea’s policy response during the high inflation after COVID-19

Chang Yong Rhee and Young Hwan Park

The Bank of Mexico’s response to the post-pandemic inflation

Jonaathan Heath and Jaime Acosta

The Central Bank of Brazil’s response to the post-pandemic inflationary spell

Fernanda Guardado

The effects of the post-COVID inflation and the Federal Reserve’s policy tightening response on financial markets

Roberto Perli and Eric LeSueur

The Federal Reserve’s responses to the post-COVID period of high inflation

Jane Ihrig and Christopher Waller

The Riksbank’s response to the post‑COVID period of high inflation

Stefan Ingves

The South African Reserve Bank’s response to the recent inflation episode

Christopher Loewald

The Swiss National Bank’s monetary policy response to the post-COVID period of high inflation

Thomas Jordan

Türkiye’s (unique) response to post‑pandemic inflation

Hakan Kara and Cagri Sarikaya

Unconventional fiscal policy in times of high inflation

Mai Chi Dao, Allan Gloe Dizioli, Chris Jackson, Pierre-Olivier Gourinchas and Daniel Leigh

Weathering the storm: How Latin America and the Caribbean navigated global inflationary pressures

Ilan Goldfajn

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