(Tiper Stock Exchange) – “Before we return to sustained growth with stable prices and sound finances, we will have to spend some time in purgatory. But a better future awaits us”. The former governor of the Bank of England said so Mervyn King in his lectio magistralis, receiving the Bancor Award 2022 established this year by the Guido Carli Association, with the patronage of Banca Ifis.
“We mustn’t be afraid of a period of higher interest rates, we mustn’t resist it,” said King who spoke of a Great Repricing, a price revision of all assets, financial and real as a result of interest rate adjustments. The former number one of the British central bank in fact noted how “the widespread idea that low interest rates are
destined to remain must be abandoned in favor of an old truth. If too much money chases too few goods, the resulting inflation cannot be curbed by central bank words alone. More than a decade of interest rates near or below zero has not resulted out of the low-growth trap”.
“There are times, and this is one of them, when interest rate hikes are good news and not bad news. Great Repricing it can be the beginning of a return to better resource allocation and faster growth.”
“I believe it is possible” to get out of the trap created by low growth and high inflation “provided that some of the misconceptions that have influenced economic policy in recent years are abandoned” including that “inflation would remain low because it was determined by an official target. Exceptionally low interest rates, both nominal and real, were considered the new normal. But we have to get out of this mentality”has explained.
“The long-awaited correction of the never-so-low interest rates is now underway and will lead to a revision of the prices of all assets, financial and real,” he said, speaking precisely of a “Great Repricing” che “although it will mean a bumpy ride for the world economy over the next few years” will offer “the opportunity to return to rates of productivity growth close to those of the twentieth century”.