Anthony Morlet-Lavidalie, economist at BSI Economics, spoke at the University of Orleans during a conference entitled « Inflation, monetary tightening,and asset valuation » atthe Cantillon Amphitheater on November 22,2022 (6:00-8:00 p.m.).
« After 40 years of trend disinflation, the resurgence of inflation to levels not seen since the oil shocks of the 1970s took everyone by surprise, especially central banks. This sharp rise in consumer prices is the result of a multitude of supply shocks that are curbing production, coupled with demand that remains strong, supported by proactive fiscal policies. In this context, central banks have had no choice but to tighten monetary policy by raising their key interest rates and ending their asset purchases, or even reducing the size of their balance sheets. While monetary tightening has only limited effectiveness when inflation is caused by supply constraints, central banks are primarily seeking to keep medium-term inflation expectations anchored around the 2% target and to avoid excessive currency depreciation, which exacerbates imported inflation. The economic downturn has scared investors away from equity markets, which have fallen sharply since the beginning of the year, and uncertainty remains too high for risk appetite to return. Bond markets have also fallen sharply under the weight of inflation. Only real estate prices have held up so far, but there are increasing signs of a crack in the market.
