It takes a serious stretch of the imagination to remember that exactly three years ago, at the US Federal Reserve's (Fed) annual symposium in Jackson Hole, Wyoming, the talk was all about the perils of low inflation and how to combat it. This year, the tone was very different. Both the European Central Bank (ECB) and the Fed firmly emphasized the need to bring inflation back to 2%, in an attempt to restore credibility eroded by poor results in 2022. This is not to be held against them.

However, while the Fed is essentially limiting itself to guiding rate expectations for the months ahead, the ECB has begun to develop a more structural analysis. In a series of speeches – first by Isabel Schnabel (the German member of the Executive Board), then from President Christine Lagarde – the idea has emerged that, since 2020, we have been entering a new period marked by inflationary risks.

Lagarde's Jackson Hole speech is the most articulate expression of that analysis. It identified three lasting mutations: the change in the energy context, amplified by the accelerated transition to a low-carbon economy; the growing fragmentation of the global economy, due in particular to the rise of geopolitical rivalries; and the transformations of a labor market still marked by the after-effects of the pandemic. The combination of these three factors could signal not only the end of a deflationary decade but also the end of the "great moderation" in prices and wages that began in the early 1990s.

There can be no doubt that the war in Ukraine marked the dividing line between a period of abundant fossil fuels and a period of mutation in energy systems. In the long term, this transformation will put an end to dependence on carbon energies and should restore a form of energy self-sufficiency, which should be a factor of stability. But the next 20 years are likely to be marked by recurrent shocks to supplies of critical minerals, and by the fragility of a changing energy system. We will not return to a world where Russian gas and American shale gas ensured market equilibrium without too many price fluctuations.

There are also plenty of reasons to believe that geopolitical rivalries and the fragmentation of the global economy will have a marked inflationary impact. However legitimate, the imperative of resilience has a cost, which will be measured in additional inflation points. Add to this the effect of what is bashfully termed China risk reduction, which is often a disguise for protectionism, in a context where, after nearly three decades as the world's reserve army, China had in any event ceased to exert disinflationary pressure on the global economy. In this area, central bankers are not in a position to make decisions, but they are right to state firmly that political choices come at a price.

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