1. Global Inflation is Likely to Have Peaked
- Key data indicators suggest that this year’s rampant global inflation has peaked.
- However, while it is likely to fall from its peak, global inflation is set to remain above central banks’ long-term targets.
Factory gate prices, shipping rates, commodity prices and inflation expectations have all begun to subside from their recent record levels.
Key data indicators suggest that this year’s rampant global inflation has peaked and that the pace of headline price growth which hit household finances and business activity in recent months is set to slow in the coming months.
According to Moody’s estimates, global inflation hit a record 12.1% in October that will be the high water mark for consumer prices.
The signs of easing price pressures would be welcome news for leading central banks, which have been raising interest rates rapidly in a co-ordinated effort to tame inflation, risking plunging major economies into recession by doing so.
While inflation has already peaked across emerging markets, recent data shows a weakening of some price pressures in developed economies.
In Germany, factory gate prices fell 4.2 per cent in October compared with the previous month - the largest monthly fall since 1948. In the US and the UK, annual producer price inflation has been slowing since the summer.
Nearly all the G20 group of leading economies that have released their October producer price indices reported a slower pace of annual growth than in the previous month, including Spain, Mexico, Portugal and Poland.
However, while it is likely to fall from its peak, global inflation is set to remain above central banks’ long-term targets.
Some economists cautioned that continued high energy costs could slow the decline. Prices for energy and other commodities could jump again if the Chinese economy makes a strong recovery, or if Russia makes further export cuts in retaliation for western price caps on its oil and gas.