When it comes to central bankers and their success in controlling inflation, past performance is no guarantee of future results, a top economist said on Saturday.
Kenneth Rogoff, an economist at Harvard University, said central banks - including the US Federal Reserve - have looked good on controlling inflation partly because of the rise of low-priced imports.
"Globalisation has, by and large, provided an extremely favourable backdrop for monetary policy over the past 20 years," Rogoff said in a paper presented at the Kansas City Federal Reserve's annual retreat in Jackson Hole, Wyoming.
Cheap imports from places such as China smooth the trade-off between growth and inflation that central banks must juggle through monetary policy. "This flattening, in turn, makes commitments to low inflation more credible and more durable," he said.
But Rogoff, a former chief economist with the International Monetary Fund, warned that the deflationary forces created by globalisation must not be taken for granted - and neither should the persistent inflow of capital from developing countries into the United States.
"Central bank policy has to insure that frameworks and institutions are robust to the risk of an eventual slowing down or reversal of some of the factors that have been so favourable for so long," Rogoff said. "The core challenge has to be to look ahead to when times might not be so favourable."
Addressing a more current issue, Rogoff said central banks might choose to allow temporarily higher inflation when their economies are hit by an unfavourable shock - such as the persistently near-record crude oil prices.
This approach is "generally considered best practice by most central banks," he said.
In that vein, the Fed this month paused a two-year string of interest rate increases, even at a time when inflation is running above the informal "comfort zones" cited by several of its top officials.