The Great Wave Is Coming for Central Banks
No matter what catchy label they attach to the economics of this era, one constant is likely to be surprise.
The new era confronting central banks could well be called the Great Wave.
Photographer: Historical Picture Archive/Corbis Historical/Getty Images
The several decades through the start of the pandemic had their share of hairy moments, but they have retrospectively acquired a reputation for tranquility. The era largely characterized by contained inflation and relatively small swings in growth — interrupted by the subprime meltdown — has given way to a period of discomfort. Officials seem to be spending almost as much energy trying to define the times as adjusting policy to live with them. Investors need to brace themselves for surprises.
Bank of France chief, François Villeroy de Galhau, has sketched this new period with some catchy prose. In contrast to the so-called Great Moderation, today’s vibe is akin to a Great Volatility, he said late last year. He previously declared that policymakers had left a “Garden of Eden.” Bank of Japan Deputy Governor Ryozo Himino did some searching of his own. In a speech last week, he said the new phase could be dubbed the Great Wave.