Key facts
- The Middle East conflict represents a negative supply shock, according to BIS General Manager Pablo Hernandez de Cos.
- Central banks globally have responded to shocks at varying speeds.
- Hernandez de Cos stated that permanent adaptation of analytical tools is necessary for central banks' reaction functions.
- Credibility, underpinned by clear mandates, central bank independence, and accountability, remains essential for monetary policy and financial stability.
ISTANBUL, Oct 9 (Reuters) - Bank for International Settlements General Manager Pablo Hernandez de Cos said on Friday that the surge in energy prices from the Middle East conflict has had moderate second-round inflation effects so far.
Hernandez de Cos made the comments in an on-stage discussion with Turkish Central Bank Governor Fatih Karahan as part of the Istanbul Economic Forum.
He noted that the Middle East conflict represents a negative supply shock. Central banks globally have responded to shocks at varying speeds, with some reacting quickly where domestic demand conditions justified it and others following more gradually, he said.
Hernandez de Cos also stated that permanent adaptation of analytical tools is necessary and must play a very important role in how central banks behave in terms of their reaction function. He added that credibility—underpinned by clear mandates, central bank independence, and accountability—remains essential for both monetary policy and financial stability. He also said that macro-prudential and monetary policy objectives are broadly compatible, though trade-offs can emerge and have been managed "in a relatively good way" in the past.