, the pandemic created unprecedented disruptions to global supply chains. second, the - 8pandemic is having a long - lasting effect on labor force participation rates. third, the credibility of the central bank is higher now than it was in the 1960s and 1970s. fourth and most importantly, unlike in the late 1960s and 1970s, the federal reserve is addressing the outbreak in inflation promptly and forcefully to maintain that credibility and to preserve the “ well anchored ” property of long - term inflation expectations. finally, economic models are important tools but need to be used with careful interpretation and judgment when history does not speak to the current situation. sound decisionmaking requires that their findings be complemented with additional analytical tools, including careful scrutiny of real - time data. thank you! - 9references ball, laurence ( 1994 ). “ what determines the sacrifice ratio? ” in n. gregory mankiw, ed., monetary policy. chicago : university of chicago press, pp. 155 – 93. cecchetti, stephen g., michael e. feroli, peter hooper, frederic s. mishkin, and kermit l. schoenholtz ( 2023 ). “ managing disinflations, ” paper presented at the u. s. monetary policy forum, new york, february 24. kohn, donald ( 2008 ). “ lessons for central bankers from a phillips curve framework, ” remarks given at the federal reserve bank of boston ’ s 53rd annual economic conference, chatham, mass., june 11, https : / / www. federalreserve. gov / newsevents / speech / kohn20080611a. htm. macklem, tiff ( 2022 ). “ opening statement before the standing senate committee on banking, trade and the economy, ” ottawa, ontario, november 1, https : / / www. bankofcanada. ca / 2022 / 11 / opening - statement - 011122. powell, jerome h. ( 2022a ). “ nomination hearing, ” testimony before the committee on banking, housing, and urban affairs, u. s senate, washington, january 11, https : / / www. federalreserve. gov / newsevents / testimony / powell20220111a. htm. — — — ( 2022b ). “ monetary policy and price stability, ” speech delivered at “ reassessing constraints on the economy

since the peak in july, the price of food has fallen by 10 % and the price of crude oil has fallen by over a quarter, and that is consistent with other indicators that point to a slowing in growth in both emerging and advanced economies. that good news on commodity prices has been offset somewhat in the uk by a falling exchange rate. sterling has been trading at around 1. 8 against the us dollar – a year ago it was 2. 0. but the same arithmetic applies : such price level shocks need have no long - term impact on the inflation rate. in the medium term the real upside risks to inflation lie at home – in whether we see “ second round ” rises in wages and prices in the domestic economy. it is to counter those pressures that the mpc have judged it necessary over the last year for growth to slow and create a margin of spare capacity in our economy. that makes it more difficult for companies to raise prices and puts more pressure on them to restrain their costs. it also re - emphasises our determination to get inflation back to the 2 % target and thus influences the expectations of financial markets, price setters, wage negotiators and households generally. and expectations themselves have an important impact on inflation. broadly, the higher households ’ expect inflation to be, the less they are likely to save today. inflation expectations also shape workers ’ wage demands as they try to protect their standard of living. and companies ’ expectations will shape the prices they set as well as their willingness to concede cost increases. we know from the inflations of the 70s, 80s, and early 90s that raising interest rates will in time bring inflation down, even when expectations of future inflation are high. but we also know how painful that process is. it works through the increased threat of bankruptcy and unemployment. that forces a change in peoples ’ behaviour and their hearts and minds and expectations follow. conversely, the more confident people are that inflation will fall back the less we have to rely on slowing the economy to force them to hold prices and wages down. that is why the risk of inflation expectations drifting up has been such a central concern of the mpc over the last year. in my view it has been particularly important through recent months, when each forecast has been higher than the one before and each inflation figure has exceeded the earlier forecast, not to confuse the central message that we will set policy to bring inflation back down to target. we have seen households ’ near - term expectations of inflation rise