What Jackson Hole is to America’s Federal Reserve, Sintra is to the European Central Bank. Each year it gathers at the hideout, near Lisbon in Portugal, to ponder the latest data, research, and policy. The IMF’s deputy director, Gita Gopinath, is expected to present three uncomfortable truths for monetary policy at the ECB Forum’s opening dinner on Monday.
One can guess at what those three truths might be. First: supply shocks can take a long time to subside, during which they drive up inflation across many sectors (core inflation in the eurozone remains stubborn at more than 5%). Second: the world is running out of workers, which may keep inflation elevated, especially in ageing Europe. Third: if fiscal policy is pushing the other way, to stimulate demand and boost investment, monetary policy must do an awful lot of work. In the coming days in Sintra, policymakers will discuss what they can do to bring down inflation, despite such harsh realities.
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