Major central banks collectively declare that the global economic recovery continues, but there are risks.
On Wednesday, Bank of Japan Governor Haruhiko Kuroda, Bank of England Governor Andrew Bailey, ECB President Christine Lagarde, and Fed Chairman Jerome Powell announced in a joint statement that they forecast economic activity to reach levels that existed before the COVID-19 pandemic by the end of 2021 and early 2022. All four spoke at the European Central Bank Forum.
Despite the optimism, the heads of central banks noted that there are still risks of uneven growth. Bailey described the recovery as "uneven."
The ongoing supply chain disruptions, including Europe's energy market, have been highlighted as a major threat to the four central banks. However, they also downplayed the risks, saying that these problems should be temporary.
Powell noted that tough monetary and fiscal stimulus measures have helped support consumer demand, but now, the supply-side constraints are holding back economic activity. He also added that the global supply crisis makes inflation more stable than expected. But, he still sees higher inflationary pressures as a temporary phenomenon. According to him, the current surge in inflation is actually a consequence of supply constraints, which meet very high demand, and all this is due to the resumption of the economy. It is a process that has a beginning, a middle, and an end.
At the same time, Lagarde also downplayed rising inflationary pressures, despite the fact that Europe is seeing a significant surge in energy prices across the board.
She noted that the overall long-term inflation expectations have risen but remain below the ECB's target and also added that inflation will remain transient because there has not been a significant increase in wages.
