While consumers generally dislike inflation because it erodes the purchasing power of their income, businesses desire a steady level of inflation because investments made in today’s prices yield higher profits and returns in the future. Governments also like low and steady inflation. With inflation, government’s long-term borrowing needs to be repaid at a lower real cost, and a nation’s real income keeps increasing as long as employment remains high and the improvement in worker productivity exceeds their wage enhancements. Prices of assets such as houses and equities keep rising, attracting investors into the economy. The idea is that the economy keeps growing and everyone benefits.
How Companies Can Prepare for a Long Run of High Inflation
Seven strategies for leaders.
May 02, 2022
Summary.
Consumers, businesses, governments, and investors are particularly concerned about recent inflation news. Thanks to demand continuing to outpace supply and Russia’s attack on Ukraine and the West’s subsequent sanctioning of Russian goods and trade, inflationary pressures and supply chain issues are real and here to stay. It’s important to develop an in-depth understanding of these problems and create a gameplan to address these rapidly evolving challenges. The authors present seven new strategies for companies to combat longer-lasting inflation.