‘The world is being rewired’ and will see more supply shocks, Mark Carney says

globalnews.ca:

Bank of Canada governor Mark Carney issued a warning at the World Economic Forum that global supply shocks are becoming more persistent, forcing central bankers to adapt to tame inflation.Carney, who also previously led the Bank of England, spoke on a panel in Davos, Switzerland at the WEF summit Thursday about how central bankers ought to adapt their approaches for the modern economy.He said the current regime has been successful so far in taming the ongoing inflationary period, as some of the supply shocks following the height of the COVID-19 pandemic and Russia’s invasion of Ukraine have unwound and higher interest rates globally have limited demand in the world economy.But he warned that central bankers cannot rest on their laurels amid ongoing geopolitical tensions and a changing economic context.“We are in a world, I would suggest, where we are going to see additional supply shocks with some relatively high degree of certainty with some persistence,” Carney said.“Effectively, the world is being rewired.”Though Carney did not directly reference Houthi attacks in the Red Sea forcing companies to divert cargo away from the key shipping corridor, he said trade routes are being “rewired” to “derisk” global supply chains.Energy systems, too, are being rewired to address climate change concerns, Carney said.

He noted that both of these changes, while they might cause shocks today, “ultimately could bring greater resilience” to supply chains.Carney also posited that a “rewiring of intelligence” is underway, but argues the impacts of that won’t be felt until later this decade.Canada’s annual inflation rate ticked up to 3.4 per cent in December 2023 but has otherwise cooled significantly over the past year and a half amid an