The Great Moderation. This is the expression coined in the 1990s and popularized in the economics profession at the beginning of this century to refer to an observable phenomenon in the major macroeconomic variables: the B decrease in their volatility. Economic cycles showed a smoother, more predictable trajectory. Factors traditionally associated with large doses of uncertainty, such as GDP growth or inflation, seemed to have settled into a path of placidity.

The reasons for this new scenario were not clear. On the one hand, it was pointed to a structural change, associated with technological, institutional and business practice improvements. On the other hand, it was suggested that we were facing an exceptional status that could only be attributed to good luck, to a fortunate combination of circumstances. A third hypothesis pointed out that the stabilizing capacity of economic policies, especially monetary policy, had been enhanced by greater technical sophistication and more appropriate institutional arrangements -such as the independence of central banks to fight inflation-.

Be that as it may, that great moderation is now seen, in retrospect, as the calm before the storm. In fact, it was probably the calm that caused or at least contributed to the gestation of the 2008 crisis. The perception of lower volatility led to a certain insensitivity in the assumption of the financial and economic risks inherent in the cycle. Overconfidence has paid dearly.

The logical reaction to what has happened has been the appearance of hypersensitivity to any hint of risk. data macroeconomics that not so long ago barely merited a line today arouse expectation, if not fear. This is the case with inflation statistics, where analysts are trying to discover the keys to the central bank's monetary policy decisions at subject .

We have just released the CPI data for Spain for last October. In year-on-year terms, prices in Spain continue to rise at the 2.3% rate already recorded in September. A similar pace also to that observed recently in the euro zone. In principle, these data would admit a positive reading. The Spanish Economics is still growing at a good pace and its inflation rate is within the range goal set by the European Central Bank (ECB), so we could speak of a certain normalization of the status.

However, data also shows a less friendly side. In both Spain and the euro zone, core inflation, which excludes the most volatile prices (energy and unprocessed food), remains very low at around 1%. Such mild pressure on prices signifies weak demand. In the case of the euro zone's Economics , moreover, this is occurring in conditions of low growth.

Shouldn't demand policies be more expansionary? Perhaps, but there is no room. On the one hand, the ECB has exhausted its ability to boost demand with monetary expansions. It must prudently normalize its policy after years of extraordinary measures. In fact, it is beginning to progressively reduce the monetary stimuli that have given oxygen to the euro zone; and interest rate hikes projected in principle for the last quarter of 2019 are already appearing on the not too distant horizon.

On the fiscal policy side, there is not much room for manoeuvre either. The current enormous public indebtedness limits the expense that can be assumed and is a risk in itself, as it can lead to financial instability. So far, the risk seemed contained, but the Italian government's arm-wrestling with the European Commission, refusing to rectify its budgets in line with European rules, threatens to blow it out of the water. Unfortunately, it is not clear how to redirect this status.

Against this backdrop, let's hope that a few tenths more or less of inflation will continue to be worthy of our attention. Anything less would be very bad news.