tend to follow a secular “ trend ” reflecting amongst others things the fast growth in emerging economies. moreover, if transitory rises in commodity prices ran the risk of triggering second - round effects, they may also have a more lasting impact on consumer price developments and medium - term inflation expectations. monetary policy then needs to avert temporary inflation increases that lead to second - round effects in wage and price - setting behaviour, for instance due to the indexation of wages and prices to past inflation. today ’ s discussion on how to react to rising commodity prices reminds me of that prevailing in the 1970s. in the aftermath of the oil price shocks of 1973 and 1979, inflation in the oecd countries increased dramatically from already relatively high levels 5. 7 % in 1971 to doubledigit numbers 14. 8 % in 1980. it seems evident that this evolution, which was later labelled the “ great inflation ”, 2 was mostly driven by increasing oil prices. 3 however, germany – and also switzerland – was a notable exception. 4 german inflation rose from 5. 2 % in 1971 to 5. 4 % in 1980. the bundesbank chose to tighten its monetary policy stance. this policy resulted in significantly higher real interest rates in germany, compared to other oecd countries. this helped the economy to grow in line with its potential. moreover, on account of the associated appreciation of the d - mark, the oil price increase had a more limited direct impact on inflation. overall, the different inflation experiences of the 1970s clearly demonstrate that the “ great inflation ” was not only the result of rising oil prices but to a large extent driven by different monetary policies. faced today with rising commodity prices we should not forget this lesson, a fortiori in a context of globally loose monetary policies and ample liquidity. 3. costs of keeping interest rates low over a long period maintaining our medium - term focus is particularly important in the current environment. short - term volatility is extensive and uncertainty remains unusually high. thus, central banks need to avoid just looking at the short - term consequences of a somewhat tighter monetary policy stance and take a longer - term perspective. this should include the costs and related risks to price stability that may arise if interest rates are kept too low for too long. the risks associated with keeping interest rates low for too long a period have been clearly exposed and documented in several recent analytical contributions. the period prior to the financial crisis has demonstrated that global policy accommodation for a protracted period of time

3 as i mentioned earlier, the risks and challenges of the build phase are very different from those in the run phase. there will be some areas, like renewables, where the private sector will be involved in both phases. in others, the execution and governance risks in the build phase don't match investors'desired risk profiles, but the revenue from the operation phase can do so. these kinds of projects will be good candidates for private ownership once construction is complete ; some state governments are recycling the revenue from those sales to fund new infrastructure. and finally, there are projects where the social benefits are not easily captured as cash flow. it is important that these kinds of projects are not under - provided, just because they would not be profitable for the private sector to run. regardless of the exact approach to funding and management of construction, infrastructure investment can involve significant spillover benefits to the rest of the economy. the bank has discussed these recently, and they bear repeating ( rba 2018 ). the direct spillovers derive from the incomes earned by the workers and firms doing the work ; most of these projects are built by the private sector on behalf of the public sector. this income gets spent or invested, which in turn generates income for someone else and so on. at a time such as now, when there is still spare capacity in the economy, this ‘ fiscal multiplier ’ can result in overall demand rising by considerably more than the original spend on the project. https : / / www. rba. gov. au / speeches / 2018 / sp - ag - 2018 - 06 - 15. html 6 / 8 6 / 15 / 2018 how infrastructure fits in | speeches | rba more broadly, and over a longer horizon, the economy benefits from a larger capital stock and the productivity benefits of infrastructure of this type. these are often hard to quantify even after the fact, but some examples might include : new export businesses enabled by the construction or expansion of an airport ; higher productivity of logistics firms if their vehicles spend less time in traffic ; and better health outcomes from reduced accident rates when roads are made safer. it is these benefits that are worth focusing on, more than the raw contribution of the building work to gdp growth. as i've emphasised on an earlier occasion, it isn't helpful to think of infrastructure as a new ‘ engine of growth ’, receiving the handover from the mining investment boom and, later, the apartment building boom ( ellis 2017 ). by