Inflation became one of the biggest problems in the post-pandemic world. The world economy suffered greatly due to the increase in prices. Governments, economists and investors alike have been trying to solve this problem.
After two years of battling runaway inflation, analysts seem split on their forecasts. Some of them think that it is declining for the last time, while others predict that prices will rise again. Still, headline inflation is much lower than it was several months ago in the major developed economies. It fell from its multi-decade peaks. Recent reports showed that in the UK, prices are finally coming down. But the labor market remains tight and that could have a negative impact on the country’s economy.
Furthermore, price pressures remain high. But energy and food prices fell slightly. Policy makers generally try to stifle UK inflation by raising interest rates. But such a tactic has a drawback. It could cause an economic downturn and investors prefer to avoid it.
What do the latest reports say about inflation?
It appears that inflation is pulling back towards the 2% level faster than analysts anticipated. That threshold is the target of most major central banks. According to new surveys, the plummeting energy prices contributed to the recent fall in headline inflation.
In Europe, natural gas prices fell to their lowest level since August 2021. They are down more than 85% compared to the high point of last year. Thanks to that, inflation in the eurozone also fell considerably.
Meanwhile, reports showed that in the United States, inflation jumped 6.4% in January. That remains the smallest increase since October 2021. Inflation spiked to a peak of 9.1% last June in the country.
In China, the reopening of the post-coronavirus pandemic supported oil prices, prompting their recovery. However, Brent crude is trading at $83 a barrel. That’s even lower by 40% compared to the $139 reached after Russia’s invasion of Ukraine. As gasoline prices in Europe also fall, inflation could drop further. So it’s good news.
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