Inflation has fallen sharply in most countries around the world—an apparent victory in the long battle for price stability. But in some countries, prices are not just increasing at a slower rate (disinflation), but below target and actually falling (deflation). Assessing the broader cross-country and historical experience is helpful to understand the UK’s experience today. How much of the decline in inflation is caused by short-term and temporary influences—such as low oil and gas prices? How much reflects output gaps, currency movements, and recent wage dynamics—which could also fade over time? Or are there permanent structural changes in the global economy generating a new era of permanently lower inflation? What are the risks of lower inflation? The answers to these questions are critical in assessing the role for the Bank of England and monetary policy around the world during this period of low inflation.
Kristin Forbes is the Jerome and Dorothy Lemelson Professor of Management and Global Economics at MIT’s Sloan School of Management. In 2014 she also became an External Member of the Monetary Policy Committee for the Bank of England. This dual role continues her tradition of using her academic background to inform her role in senior policy positions. From 2003 to 2005 Forbes served as a Member of the White House’s Council of Economic Advisers (where she was the youngest person to ever hold this position). From 2001-2002 she worked in the U.S. Treasury Department as the Deputy Assistant Secretary of Quantitative Policy Analysis, Latin American and Caribbean Nations. She also was a Member of the Governor’s Council of Economic Advisers for the State of Massachusetts from 2009-2014.
Silvana Tenreyro is Professor of Economics at LSE.
The Department of Economics at LSE (@LSEEcon) is one of the largest economics departments in the world. Its size ensures that all areas of economics are strongly represented in both research and teaching.
The Centre For Macroeconomics (@CFMUK) brings together world-class experts to carry out pioneering research on the global economic crisis and to help design policies that alleviate it.
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A transcript of Professor Kristin Forbes's lecture is available to download:
When, Why, and What's Next for Low Inflation? No Magic Slippers Needed (pdf)