Global upheaval is unleashing persistent price pressures that present new challenges, economists told the annual Jackson Hole gathering.
, cautioned that in light of mounting geopolitical tensions and tendencies towards “reshoring” — the return of manufacturing activities and jobs to home countries — the global economy could well be “slowly approaching an inflection point beyond which things will change”. While that could lead to local growth booms, it could also result in production inefficiencies, he said.
Jeremy Stein, a former Fed governor, said he expected R-star to be higher simply because “inflation may stubbornly want to be 3 per cent” versus the Fed’s 2 per cent target, preventing the central bank from easing any time soon. Pierre-Olivier Gourinchas, the chief economist at the IMF, sees benefits in more “disaggregated”, granular models which take into account the fact that shocks — including those associated with COVID-19, Russia’s invasion of Ukraine and the climate transition — are affecting different sectors within and across countries in different ways.
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