Pushing the current inflation wave to the top is a painful job for economists and central bankers who have been proven wrong time and time again over the past year.
But Wednesday’s data showed that some inflation measures cool down In the world’s two largest economies, a debate over whether the worst is over after a year of skyrocketing prices could be reignited.
U.S. consumer prices did not rise in July compared to June as gasoline costs fell sharply Prices climb steadily in the past two years.
China’s annual rate of factory inflation slowed to a 17-month low, while consumer prices rose less than expected.
After wrongly predicting last year that high inflation would be temporary, most central bankers, including the Federal Reserve, have stop Trying to determine the exact date when they expect current price growth to peak.
U.S. central bank officials see inflation The ECB decelerated in the second half of the year, peaking in the third quarter and the Bank of England in October.
Here are some key figures shaping the inflation debate:
Raw materials are getting cheaper…
The culprit behind last winter’s spike in consumer prices — energy and other raw materials — could be a harbinger of this fall in inflation.
Prices of key commodities such as oil, wheat and copper have fallen in recent months after surging earlier this year. Oil and food prices soared after Russia invaded Ukraine.
Prices fell as consumers grappled with high prices due to weak global demand and economic slowdowns in China, the United States and Europe.
Some inflation indices are already affected: Fewer companies are reporting increased input costs, and wholesale price increases are declining in many parts of the world
…but the European Energy Act will not
European households are unlikely to see their energy bills drop anytime soon as winter approaches on the continent.Recently, there are rumors rationing in euro area countries including Germany.
This is because gasoline price In Europe – which has relied on Russia for most of its imports for many years – it is still four times what it was a year ago and close to an all-time high.Had great uncertainty The surrounding airflow passes through the Nord Stream pipeline.
Even in Britain, which has its own gas but little storage capacity, consumers’ electricity bills will rise sharply in October when the current price cap expires.
There is also bad news for German drivers, who will see subsidies at petrol stations expire at the end of August.
Expected to be (mostly) under control
Some central bankers can rest assured that investors have not lost faith in them.
Market-based measures of inflation expectations in the U.S. and the euro area are just above the central bank’s 2 percent target, but remain at uncomfortably high in England.
Following last month’s Fed meeting, Fed Chairman Jerome Powell stressed that the central bank is ready to use all its tools “to better balance demand and supply to bring inflation back to our 2% target.”
Consumers in the U.S., euro zone and U.K. expect inflation to stay above the 2 percent target for years to come.
A vast majority of economists surveyed said inflation will remain elevated for at least a year before falling sharply, according to a Reuters poll. Some 39% of economists surveyed said they expect inflation to remain elevated beyond 2023.
Core prices may be trending down…
Core Inflation, a Measured Number inflation While prices for volatile ingredients such as food and fuel are not included, cooling has already started in the US and UK. Some economists predict Japan and the euro zone will follow.
Still, core inflation remains above the comfort zone of most central banks in both advanced and developing economies. That means the central bank will continue to increase borrowing costs.Fed last month The second rate hike in a row by 75 basis points. The bank met again in September to consider further tightening.
AI models used by Oxford Economics suggest that core inflation in Japan and the euro zone will also peak in the second half of the year.
Originally developed to help machines learn human language, the Long Short-Term Memory network parses detailed inflation data to discover patterns that help predict future consumer price indices.
…but wages are rising
Wages for workers rose last year due to a tight labor market, but not as fast as inflation.
The US employment cost index also recent It was revealed that higher wages also led to a significant increase in U.S. labor spending in the second quarter of 2022.
U.S. nonfarm labor costs per unit of product rose about 10 percent in the second quarter of this year, according to data released earlier this week.
One of the main factors affecting pricing in the long term is wages, which can start a spiral if they rise too quickly.
“If that happens, we end up with an almost self-fulfilling prophecy that companies will start pushing price increases on to their customers,” said Brent Meyer, a policy adviser and economist at the Federal Reserve Bank of Atlanta. Meyer recently told Al Jazeera.
Outside the U.S., the recovery is more sluggish, and an impending recession could make it harder for workers to negotiate lower wages.