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Central banks warn that the world economy is at risk of entering an “era of high inflation” with high indebtedness


“Dangers of stagflation loom large” due to a combination of different factors, according to the Bank for International Settlements.

The Bank for International Settlements (BIS), the group of the main central banks of the world, has warned that the global economy runs the risk of entering into a “new era of high inflation”.

“The dangers of stagflation (a combination of high prices with little or no growth) are of great importance, since the combination of persistent interruptions of the covid-pandemic 19, the conflict in Ukraine, the increase in commodity prices and financial vulnerabilities cloud the outlook”, says the BIS.

In your report annual financial, published this Sunday, said organization highlights that the priority for central banks is to restore low and stable inflation. In doing so, they must seek to minimize the impact on economic activity, thus safeguarding the financial stability, recommended.

“Prevent inflation from taking root”

The BIS considers that it is unlikely that a stagflation similar to that of the 1970s, since today there is “better monetary policy, macroprudential frameworks and less dependence on energy”, but warns that the current context of financial vulnerabilities such as high national debts and overvalued asset prices, could magnify any slowdown.

“The key for central banks is to act quickly and decisively before the Inflation sets in. If it does, the costs of bringing it back under control will be higher. long-term benefits of preserving stability for households and businesses outweigh any costs in the short term”, commented the director general of the BIS, Agustín Carstens.


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