Has the Soaring Global Inflation Peaked? Signs of Slowdown...

[Image source=AP Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] Signals are pouring in that the inflation soaring worldwide has peaked and is slowing down. This is welcome news for central banks around the world, which have faced concerns about slowing growth due to cumulative high-intensity tightening.

According to Wall Street investment bank Morgan Stanley on the 27th (local time), global inflation is analyzed to have peaked in the current fourth quarter of this year and is on a downward trend. Morgan Stanley stated in a report, "Demand slowdown, price reductions due to increased inventory, and falling housing prices will help ease inflation." Moody's Analytics also viewed that the global consumer price inflation rate in October peaked at 12.1%.

This is because leading indicators of global inflation such as major countries' Producer Price Index (PPI), maritime shipping rates, raw material prices, and expected inflation have retreated from all-time highs, easing price pressures. Germany's October PPI fell 4.2% month-on-month, the largest drop since 1948. In most G20 countries including the United States and the United Kingdom, the October PPI increase slowed.

Additionally, prices of raw materials, energy, and food have recently been on a downward trend. The United Nations Food and Agriculture Organization (FAO) world food price index showed a decline last month. The European natural gas benchmark, the Netherlands TTF futures, soared to 311 euros per MWh but recently dropped below 130 euros. The Brent crude oil futures, an international oil price benchmark, also fell more than 10% in the past month alone.

Jennifer McKeown, Chief Global Economist at Capital Economics, said, "Most raw material prices are falling as demand weakens," and predicted, "Global inflation will decline from next year." Mark Zandi, Chief Economist at Moody's Analytics, said, "Inflation seems to have peaked," and added, "Inflation pressures and supply chain bottleneck easing are precursors to consumer price easing." The rising trend of global expected inflation among investors has also been curbed. In some emerging countries such as Brazil and Thailand, a decline in consumer prices has already been confirmed.

This inflation slowdown is good news for central banks including the U.S. Federal Reserve (Fed). In a situation where concerns about recession due to high-intensity tightening are deepening, it allows some leeway in future monetary policy operations.

However, there are also repeated points that even though inflation has passed its peak, there is still a long way to go to reach the price target of the 2% range. In addition, Russia's crude oil embargo and China's economic recovery are considered major variables that could spur raw material price increases at any time. Nathan Sheets, Citi's Head of International Economics, recently pointed out that while many indicators indicate a price decline, high inflation will "continue at least for the time being, or for a considerable period next year."