Looking Back, Looking Forward: Monetary, Fiscal and Structural Policies for an Older, Indebted and More Fragmented World

With interest rates in Developed economies plateauing in the late fall of 2023 (Emerging markets like Brazil had their first rate cuts already in the summer of 2023), and as we seem to be approaching a so-called soft landing from the most serious inflationary episode the world has experienced since the “Great Inflation”, this is more of a moment of a sigh of relief than a victory lap for central bankers (or at least for those in Developed economies). There are still vast accumulated liabilities and large uncertainty about the future, with the ultimate consequences of the many ongoing shocks still unclear. Reflecting long-term underlying trends, the global economy seems to be (re)fragmenting, becoming more digital and facing long-term “transitions”, while governments around the world assume a more central role in economic life, with all those elements potentially affecting again the behavior of economic agents. Are the monetary tool kits and frameworks still “fit for purpose” in this era? What needs to be revised and what not, and where do we need to go from here? These are questions that should be answered with both honesty and humility, while recognising the realities and constraints of policy making.