A severe drought that has reduced water levels in the Panama Canal threatens to boost shipping costs that may keep inflation elevated, a new challenge to global central banks as they seek to contain inflation. Water levels at Gatun Lake, which feeds the locks in the Panama Canal to raise vessels as they pass from the Pacific Ocean to the Atlantic, have fallen well below normal, resulting in weight limits and rising surcharges for vessels traversing the canal.
The Panama Canal Authority is forecasting the water level in the Panama Canal to fall to a record low of 78.2 feet (23.86 meters) in July, far below the five-year average of 84.9 feet for July. In addition, the drought conditions that have led to shrinking water levels in the canal may worsen if a forecasted El Nino weather system develops this summer. The El Nino pattern typically leads to severe drought and higher-than-normal temperatures for Panama.
