fragmentation. second, climate change and the necessary decarbonisation of the economy will require far - reaching adjustments. macroeconomic developments are therefore highly uncertain. here, we can learn from history. the period of high inflation in the 1970s was also accompanied by geopolitical turmoil and energy supply challenges. with hindsight, we can now see that unanchored inflation expectations were a key reason why inflation remained so persistently high at that time. 4 some important lessons from that period are : don't let inflation expectations become unanchored, don't shy away from a strong monetary policy response and don't ease up too soon. however, geopolitical and thus also geo - economic fragmentation could also cause a lasting increase in price pressures. for example, uk economist charles goodhart suspects that globalisation – above all, china's integration into the global economy – has been an important factor in the low inflation rates of recent decades. 5 economic fragmentation could therefore increase price pressures over an extended period of time. and a lasting increase in price pressures would also require a lasting tightening of monetary policy. overall, however, empirical evidence for the impact of globalisation on inflation is mixed. 6 above all, the extent of this effect is subject to dispute and difficult to distinguish from other factors. for example, the subdued inflation dynamics since the early 1990s could also have resulted from the increasing stability orientation of monetary policy in many 3 / 4 bis - central bankers'speeches countries. that would, of course, be good news for us ; price stability could then be achieved with less effort. but i will not count on it. in these complex circumstances, i am wary of declaring a new era of high interest rates. 6 closing remarks ladies and gentlemen, it is only human to zone in on the latest news when assessing a situation. it is easy to overemphasise the present. in behavioural economics, this effect is called recency bias. i think a prime example of this is the economist article i mentioned at the beginning of my speech, which assumed there would be zero interest rates forever. one thing is clear : the era of zero interest rates is over for now. but the truth is also that we don't know what the future holds or what circumstances we will face in a few years'time. what we do know, however, is that monetary policy will do what is needed to overcome high inflation. it is important for banks and other financial market players to be prepared

for this. communication between central banks, supervisory authorities and the banking sector is vital to avoid falling victim to recency bias and making costly misjudgements. i am confident that this gathering will make a very valuable contribution to this aim, and i hope it will bring forth some fascinating discussions and insights. thank you for your attention. 1 the economist, the eternal zero, 10 october 2020. 2 deutsche bundesbank, arduous recovery amid high and only gradually easing inflation – outlook for the german economy up to 2025, monthly report, june 2023. 3 european central bank, eurosystem staff macroeconomic projections for the euro area, june 2023. 4 reis, r. ( 2021 ), losing the inflation anchor, brookings papers on economic activity, bpea conference drafts. 5 goodhart, c. and m. pradhan ( 2020 ), the great demographic reversal – ageing societies, waning inequality, and an inflation revival, palgrave. 6 european central bank ( 2021 ), the implications of globalisation for the ecb monetary policy strategy, occasional paper no 263. 4 / 4 bis - central bankers'speeches