Our business surveys report widespread labour shortages. And wage growth has risen and continues to broaden. With demand running ahead of supply, competition is posing less of a restraint on price increases, and businesses are passing through higher input costs more quickly. As a result, higher energy and material costs are showing up in the prices of a growing list of goods and services.
Low interest rates will reduce net interest margins (a key determinant of banks’ profits) and may accentuate growth in non-deposit-taking, non-bank lending institutions. While changing consumer preferences towards online banking and digitisation of payments – which have been accelerated by social distancing – may expose differences in banks’ technological capacity and cost structures.