As inflation persists, the growing awareness that supply shocks could have more enduring – perhaps permanent – effects has highlighted the need for a firm monetary policy response.1 Global value chains could be durably affected by the memory of pandemic restrictions and the worsening of geopolitical tensions.
As firms de-emphasise efficiency maximisation in favour of resilience (or social responsibility, for instance, when it comes to climate change), supply chains could be shortened. The words “reshoring,” “friendshoring” and “deglobalisation” have become part of our vocabulary. Production costs may thus be on a rising trend for some time. Likewise, energy and food supplies could remain constrained for the foreseeable future.