By Leika Kihara
TOKYO (Reuters) – Bank of Japan Governor Haruhiko Kuroda said on Wednesday that a “global jump” in inflation is among the main challenges for central banks, which is likely to lead to different monetary policy responses from country to country.
The current rise in inflation is driven both by supply constraints and a strong recovery in demand seen in some countries after the pandemic-induced crisis, Kuroda said.
In Japan, pent-up household demand and wage growth were modest compared to the United States and European countries, he said.
“Given these differences in supply and demand effects, the appropriate monetary policy response will also differ between countries,” Kuroda said in a speech at an academic seminar hosted by the Japanese central bank.
“A common challenge for each country is to determine the magnitude and persistence of inflationary pressure.”
Another challenge facing central banks is the heightened geopolitical risk triggered by the Russian invasion of Ukraine, which has pushed up commodity prices and led to higher inflation around the world, Kuroda said.
Structural changes brought about by the pandemic, such as the reorganization of supply chains and rising income inequality, can also affect an economy’s potential growth rate and “have implications for the effectiveness of monetary policy and appropriate responses,” Kuroda said. .
“Central banks must therefore pay close attention to changes in economic structure and their potential impact on prices and the real economy,” he added.
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