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Research Suggests Challenges in Managing Global Inflation Pressures in the Future

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The Challenges of Managing Global Inflation Pressures

The task of managing global inflation pressures may become increasingly difficult in the coming years, according to research presented at the Federal Reserve's annual conference of central bankers in Jackson Hole, Wyoming. Rising trade barriers, shifting global trade patterns, and the transition to renewable energy are among the factors that could intensify inflation pressures worldwide. These trends have the potential to disrupt supply chains, increase government borrowing, and drive up demand for raw materials, all of which can contribute to heightened inflation. The prevalence of aging populations and a transition away from carbon-emitting fossil fuels further complicate the inflation outlook. Central banks, including the Federal Reserve and the European Central Bank, are grappling with the challenge of curbing high inflation while meeting their inflation targets. The changing global trade landscape, with a decline in China's share of U.S. imports and the emergence of "friendshoring" and "reshoring" trends, adds another layer of complexity. While weakening growth in China may help cool inflationary pressures in some areas, the widespread use of subsidies and trade barriers raises concerns about inefficient manufacturing practices and economic fragmentation. The research highlights the need for central banks and policymakers to navigate these complex dynamics to effectively manage inflation in the years ahead.

Implications of Global Inflation Pressures for New Businesses

The increasing difficulty of managing global inflation pressures, as highlighted in recent research, could pose significant challenges for new businesses.

Supply Chain Disruptions and Rising Costs

Rising trade barriers and shifting global trade patterns could disrupt supply chains, potentially leading to delays, increased costs, and reduced competitiveness for new businesses. The transition to renewable energy, while necessary for environmental sustainability, could also drive up demand for raw materials and increase government borrowing, contributing to inflation pressures.

Demographic Shifts and Inflation

The aging population trend could further complicate the inflation outlook, as older people are less likely to remain in the workforce, potentially leading to labor shortages and wage inflation.
Adapting to Changing Trade Landscapes
The changing global trade landscape, with a decline in China's share of U.S. imports and the rise of "friendshoring" and "reshoring" trends, adds another layer of complexity. New businesses will need to adapt to these changes and develop flexible, resilient strategies to navigate potential disruptions and cost increases. The research underscores the importance of strategic planning and adaptability in the face of these complex dynamics, as new businesses strive to thrive in an increasingly challenging global economic environment.
Story First Published at: https://financialpost.com/pmn/business-pmn/global-inflation-pressures-could-become-harder-to-manage-in-coming-years-research-suggests
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