Business News Asia
Why is this?
The transition to a sustainable economy exacerbates “global inflation”
While the global economy has faced inflation caused by successive money printing and supply chain manipulation since Covid-19 erupted, many big thinkers are focused only on staying in power and pushing the socialist green agenda further.
However, a major factor that has contributed to the deterioration of inflation is the fact that the world economy is in transition to a green economy (Greenification). As a result, manufacturers’ costs are also rising.
Principal Global Investors, an asset management firm, said the increasing number of large companies investing in the transition to a green economy may lead to short-term inflation.
Business costs for these companies will also increase due to various environmental regulations such as the need to purchase carbon credits or penalties if the level of greenhouse gas emissions cannot be controlled as targeted. Business models have also been changed in order to be greener, which may lead to higher costs in other areas as well.
Obviously, the consequences are higher costs that companies and consumers have to bear in order to make the economy more environmentally friendly. This could mean lower profits for entrepreneurs and investors, or the price of goods for consumers has to be made more expensive.
Moreover, Sebastien Galy, senior strategist, said that rising inflation will continue for another 10 years as the economy transitions to a greener economy. With many additional factors, such as the reduction of fossil fuels for power generation, this will cause energy prices to stabilize at a high level. Eventually, this will continue until the world has completely switched to the use of renewable and clean energy.
Moving to a green economy will be a challenge for central banks in many countries. All central banks around the world are struggling with inflation. The Federal Reserve is expected to have to raise the key interest rate further, perhaps 3-4 times in the next 2 years.