olli rehn : price dynamics speech by mr olli rehn, governor of the bank of finland, at the 2024 boj - imes conference " price dynamics and monetary policy challenges : lessons learned and going forward ", hosted by the institute for monetary and economic studies, tokyo, 27 may 2024. * * * slides accompanying the speech thank you, athanasios, and my sincerest thanks to governor ueda for the invitation. this conference continues to be a highly rewarding event for macroeconomists and central bankers alike. in my opening remarks, i will talk about the exceptional price dynamics over the past crisis years, especially highlighting the paramount importance of keeping inflation expectations anchored. three periods of inflation in the euro era, 1999 - 2024 ( slide 2 ) to set the stage, let me illustrate the brief history of inflation in the euro area with a graph that neatly divides the last quarter century of the euro into three periods of inflation, on average : 1 ) at around 2 % during the waning great moderation in 19992009 ; 2 ) at 1. 2 % during the post - financial crisis below - target inflation in 2009 - 21 ; and 3 ) at 6. 6 % during the years of supply shocks and accelerating inflation since 2021. each of these periods had a specific set of inflation ( or deflation! ) drivers and price stability anchors, and thus specific price dynamics and specific policy issues. in the recent years, most advanced economies experienced a quicker than expected recovery from the covid pandemic, which coincided with a series of unprecedented supply - side shocks, including broad - based increases in commodity prices due to russia's unjustified and brutal war in ukraine. fiscal policy also played a role in fuelling demandside inflation, especially in the united states. rapid rise of the energy bill in the euro area – and its stabilization : energy imports of gdp in the euro area, 2015 - 2023 ( slide 3 ) in the early stage of the inflation surge, energy prices were the key driver of the euro area inflation, while moderate wage inflation worked as the anchor, dampening price pressures. at its height in 2022, the energy bill of the euro area skyrocketed to ca. 7 % of gdp, and the increase – or an extra tax on ea consumers, if you like – was as much as 4 percentage points, which is equivalent to roughly 2½ times gdp of finland. while the united states is

about : masaaki shirakawa ( bank of japan ), sergey ignatiev ( bank of russia ) and miguel fernandez ordonez ( bank of spain ). when the recent financial crises erupted in 2008, there was an emerging consensus in the world on the good strategies for central banks. this consensus emphasized the objective of price stability, which could be pursued by a suitably informed interest rate policy and the careful management of inflation expectations. now, in the current situation, some new ( or old ) questions have been raised : for instance, how should central banks relate to the objective of financial stability without compromising their commitment to price stability? tomorrow, we will start with a monetary policy session presided over by the new president of the bundesbank, jens weidmann. professor carl walsh of the university of california at santa cruz will be the main speaker in that session, and three central bank governors – athanasios orphanides, from cyprus, mark carney from canada and agustin carstens from mexico – will comment. the globalization of financial markets is not a new thing in itself, but during the most recent wave of globalization the volume of finance channelled through international financial markets has grown tremendously. at the same time, the stability of national economies has become absolutely dependent on the stability of the international financial markets. it is clear, then, that the world needs a global approach to financial stability. we are seeking a new balance between market discipline, transparency and stricter regulation of the conduct of financial institutions and market participants. in our second session tomorrow a panel will deal with some of the financial market issues. three well known governors will participate in the panel : stefan ingves from sweden, yves mersch from luxembourg and nout wellink from the netherlands, as well as a renowned researcher, professor bengt holmstrom of mit. the luncheon address will be given by governor mervyn king of the bank of england, who, among his other distinctions, holds an honorary degree from the university of helsinki. the world still faces tremendous gaps in living standards between countries, and opportunities gaps between generations in many countries. even in the advanced countries, the economic adjustment seems to be leaving large parts of the population, especially the young, with disappointingly few opportunities to realize their human potential. the narrowing of these gaps in living standards and opportunities requires economic growth. but it has to be growth which is consistent with the new divisions of labour in the world economy, and which is sustainable in