Will demographic changes boost inflationary pressures?

The rapid growth of the global labour supply in the past few decades looks set to give way to a period of much weaker growth. Some argue that this will reverse the decline in inflation seen in recent years as the bargaining power of labour rises and an ageing population boosts the number of consumers relative to producers. But there is a lot of uncertainty about how demographic changes affect inflation. Even if the net impact is to push inflation up moderately, other factors such as the attitudes of policymakers towards inflation are likely to play a far bigger role in determining whether we see higher inflation in the long run.
Vicky Redwood Senior Economic Adviser
Continue reading

More from The Long Run

Long Run Update

The implications of accelerated renewable electricity use

Accelerated adoption of renewable electricity will cause demand and prices of coal and natural gas to fall over the long run. While we think the global economy will handle this transition well, there will be some winners and losers depending on which commodities countries import or export.

15 October 2021

Long Run Returns Monitor

Long Run Returns Monitor (Sep.)

Our monthly Long Run Returns Monitor provides our updated long-term projected returns for major asset classes, as well as a summary of the macroeconomic forecasts which underpin them. All projections in this publication are as of 27th September 2021. A more detailed explanation of our views can be found in our annual Long Run Economic Outlook and Long Run Asset Allocation Outlook.

29 September 2021

Long Run Update

Are we on the way to a bigger state?

While it may take years or decades before the evidence is clear, there are tentative signs that the pandemic has accelerated a shift towards a bigger role for the state in advanced economies.

24 September 2021

More from Vicky Redwood

Long Run Focus

Global migration to bounce back

Global migration has ground to a halt over the past year or so, but we doubt that the pandemic will have any major lasting impact. Moreover, there is potential for migration to get a fresh impetus from a big rise in the number of people leaving Africa over the coming decades. This could help to mitigate the problem of ageing populations in developed markets, although countries will continue to display varying degrees of openness to immigration.

15 June 2021

Global Economics Update

How concerning is the recent rise in inflation?

A rise in inflation was always likely to happen this year as economies re-opened and energy prices recovered from last year’s sharp falls. But in the US in particular, the increase since the start of the year has exceeded even our relatively strong expectations. While this might primarily reflect transitory factors, we continue to think that the risk of a sustained rise in inflation is bigger in the US than in other developed economies.

10 June 2021

Long Run Focus

Will we start working less?

The downward trend in average working hours in advanced economies has slowed or stalled in the past few decades. Yet there are reasons to think that the decline will resume, at least in some sectors and some countries. Other things equal, fewer hours worked would dent GDP. However, a reduction in working hours could boost participation and/or make workers more productive. As for the impact on the composition of economies, a rise in leisure time could give a boost to recreational sectors.

13 May 2021
↑ Back to top