OSLO: The head of Norway’s mammoth sovereign wealth fund said on Wednesday it would be “quite difficult” to bring down global inflation due to persistent upward pressure brought on by climate change and global market trends.

But a positive development in the world is artificial intelligence, which will enable us to concentrate on the “most fun” tasks, Nicolai Tangen, the chief executive of Norges Bank Investment Management which manages the fund, said as he addressed current economic trends while presenting the fund’s half-yearly report.

Central banks around the world have struggled to rein in inflation despite numerous interest rate hikes since the end of the Covid pandemic.

“We think it could be quite difficult to bring down global inflation,” Tangen said.

Manufacturing costs have been rising amid a global push for “nearshoring”, where goods are produced closer to their consumers, Tangen said.

In addition to that trend, “the new thing here is the climate effects, that is to say, the link between the climate and inflation,” he said, pointing to rising food costs.

“More expensive olive oil, potatoes, beef, all these things and that fuels inflation,” he said. “What’s new is that (the climate) is also affecting productivity.” Tangen cited a summer “in Europe this year so hot that you can’t work in the middle of the day”, as well as increasingly extreme weather events that dissuade tourists.

“And then there’s nothing going on in the stores... We shut down parts of society during certain periods due to the climate,” he said.

Published in Dawn, August 17th, 2023