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Central banks may come under increasing political pressure to ease monetary policy early, particularly if economic pain begins to mount. In some instances, governments may enact fiscal measures that directly or indirectly counteract central bank objectives. This could prolong the current economic adjustment period, and lead to currency and economic volatility at a local level.

Skills and materials that help achieve the green transition will remain in high demand over the coming years, and the need for energy security only exacerbates the potential for shortages that may drive energy and commodity prices higher. Policies that try and put a price on environmental externalities could lead to higher inflation for a number of years.

While the era of security could boost investment and R&D, it might also sacrifice efficiencies, lowering potential economic growth. The re-establishment of trade barriers in pursuit of national security would do the same and could also contribute to higher inflation.

Technological transformation can bring about economic and societal challenges. Capital-intensive and “labor-lite” innovations could concentrate wealth in fewer hands, potentially stimulating populist narratives. It is also worth monitoring how the recent changes in working arrangements will affect labor force participation and productivity in the long term.