Megan Greene, senior economist at the Bank of England, discusses the complexities of monetary policy amid persistent supply shocks. She describes current central banking conditions as operating on hard mode, where traditional tools face unprecedented constraints from global supply chain disruptions and commodity price volatility.

The BoE official explains how supply shocks complicate inflation targeting, forcing policymakers to balance price stability with economic growth concerns. Greene emphasizes that conventional monetary policy responses may prove insufficient when the root causes of economic instability stem from production bottlenecks rather than demand-side factors.

For markets, this environment creates pricing uncertainty and complicates investment decisions. Businesses face higher input costs with limited pricing power, while investors grapple with the challenge of distinguishing between temporary inflationary pressures and persistent structural changes in the global economy.

Greene concludes that central banks must adapt their frameworks to better address supply-side disruptions, acknowledging that hard mode may become the new normal rather than a temporary challenge.