Source: ITR Economics – Now part of Crowe
Factors Contributing to Rising Inflation
Inflation is a complex economic phenomenon driven by multiple factors. In recent times, the probability of inflation moving higher has increased due to several key elements. Let’s explore how tight labor markets, tariffs, fiscal deficits, and higher electricity prices contribute to rising inflation.
Tight Labor Market
One of the primary drivers of inflation is the tight labor market. When unemployment rates are low, employers often face difficulties finding suitable workers. This scarcity prompts companies to increase wages to attract and retain employees, which is especially true when the business cycle improves as we are forecasting for 2026.