Navigating through uncertainty

It’s becoming harder to predict how and why prices change. This may be because of sudden shocks, like the outbreak of war, or because of slow-moving shifts that change the way our economies work. Or it may be a combination of the two. Uncertainty is a defining feature of today’s economic landscape.

Given this, prices can change faster and with greater intensity. This is not just a short-term trend. Powerful forces like geopolitics, the use of artificial intelligence, population ageing and threats to the environment are also reshaping longer-term inflation trends. And these trends no longer pull prices clearly in one direction. This makes it more difficult to predict how inflation will evolve over time.

In this uncertain terrain, we have to be vigilant and flexible to keep inflation at around our 2% target. We also need appropriate analytical and monetary policy toolkits that are adapted to these new challenges.