The Bank of England's Megan Greene on Monetary Policy in a World of Supply Shocks
Odd Lots11 Maj

The Bank of England's Megan Greene on Monetary Policy in a World of Supply Shocks

Ever since Covid, central banks around the world have had the same problem. They have tools that are designed to modulate demand, but so many challenges have involved the supply side of the economy. Whether we're talking about supply chain disruptions, the war in Ukraine, and now the war in Iran, these are all issues for which monetary policy is of limited value. Of course, the temptation is to "look through" these events, recognizing the fact that these disruptions don't say much about the actual underlying state of the economy. But when we get one shock after another, it gets harder and harder to keep using words like "transitory." On this episode we speak with Megan Greene, an external member of the Monetary Policy Committee at the Bank of England. We talk about the compounding effects of all these shocks (including the trade war and Brexit), how she's thinking about the first- and second-order effects of each, and why for now, despite the underlying weakness of the UK economy, she remains squarely focused on the risks of higher inflation.

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