PECULIARITIES OF MONETARY REGULATION IN THE CONTEXT OF THE POST-COVID INFLATION SURGE

Abstract

The article examines the peculiarities of the post-COVID inflation surge, the reactions of major central banks to rising prices, and the ensuing debates within the academic and expert communities.
As a result of the COVID-19 pandemic and the Russian-Ukrainian war, there was a rapid acceleration of inflation on a global scale. The article demonstrates that this price surge exhibited several unique features that prevented it from being interpreted as classical demand-driven inflation. Despite these characteristics, central banks significantly raised key interest rates and began to reduce their balance sheets.
It was found that the rate of inflation slowed much faster than predicted by classical monetary policy algorithms. These developments sparked heated discussions regarding the primary causes of the post-COVID inflation surge and the appropriateness of various countermeasures against price increases. Many economists argued against the significant hikes in interest rates, asserting that multiple supply shocks, rather than overheating of the economy, were the main drivers of rising prices. Concurrently, the ideas of employing fiscal and structural policy tools to reduce inflation, as well as reviving price regulation strategies for strategic goods, gained popularity.
These discussions had little impact on central bank policy. The conclusion drawn is that central banks should adopt a more open and flexible approach in assessing inflationary processes and their own roles in ensuring price stability.