October 9, 2025

Robust Monetary Policy under Inflation Uncertainty

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Central banks face challenges in managing inflation without causing economic damage, especially during shocks.
The analysis considers both demand and supply shocks as contributing factors to inflation.
Meeting inflation goals requires balancing immediate responses and long-term economic stability.
The findings highlight the importance of flexible approaches to monetary policy amid uncertain conditions.

Implication

Analysis explores how central banks respond to inflation via demand and supply shocks, suggesting minimal economic damage.

When inflation stems from both demand and supply shocks, how can central banks act without triggering deeper economic damage?

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Mario Carceller del Arco (2025) studied this question.

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Analysis explores how central banks respond to inflation via demand and supply shocks, suggesting minimal economic damage.

When inflation stems from both demand and supply shocks, how can central banks act without triggering deeper economic damage?