Is the Global Inflation Peaking Yet?

Market experts' opinions differ sharply in their assessment of inflation peak and how much it may fall.

Is the Global Inflation Peaking Yet?

Much of the world is battling an inflation fire. The debate last year over whether the price pressures were transient or not has faded away. The big debate now is whether central banks have done enough to tame inflation down and if inflation will go away.

“I’m not going to jump ahead of data, but it is very possible that we are peaking,” Kristalina Georgieva, managing director of the International Monetary Fund (IMF), told Bloomberg on Monday, referring to global inflation. However, in its latest global economic outlook report, released last month, the organization forecasted global inflation to peak at 8.8% later this year and fall to 4.1% by 2024.

Financial markets seem to be betting on the possibility that inflation is near its peak in many major economies. Investment Officer Lisa Shalett at Morgan and Stanley surmises that inflation in the US may reach its peak soon. “Although uncertainty remains, we see solid indications of both softer demand and more supply, suggesting that inflation is poised to decelerate in the months ahead", wrote the executive in the investment insights section of the company website.

According to the Nobel Prize-winning economist Paul Krugman, prices in some key areas that contribute to inflation, including rental prices, have been declining, but these “lagging” indicators have yet to show up in official data. “There’s a good case that substantial disinflation is happening, but not captured (yet) by the standard measures,” wrote the economist on Twitter.

But despite the uncertainty over lagging indicators, not everyone believes that inflation must already be on the wane. Nearly 60% of CFOs at major corporations polled by CNB in a late September survey, said they did not think inflation had already peaked, with many expecting a recession to hit in the early part of next year before inflation recedes.

Former Treasury Secretary Larry Summers has been especially pessimistic about the Federal Reserve’s chances to bring down inflation fast and without triggering a severe economic downturn, saying last month that only a recession and unemployment above 6% could lead to inflation reduction in the U.S.