Global Inflation Tracker: Q4 2023

Delivery

This report comes in PPT.

Key Findings

Inflationary pressures forecast to continue to ease in 2024

Global inflation is expected to decelerate to 6.9% in 2023 and moderate further in 2024 to 4.9%. Stricter monetary policies, weaker economic growth and a consequent demand slowdown will help to reduce price pressures. Lower food commodity and, especially, energy prices are also helping to curb inflationary pressures. Nonetheless, inflation in the largest economies remains above a 2% level due to persistently high core inflation (excluding price fluctuations of energy and food). This is likely to prompt central banks to keep interest rates higher for a longer period.

Labour markets show signs of cooling down

Inflationary pressures from services remain elevated and contribute to the persistently high core inflation. Strong labour markets and consequently growing wages as well as strong consumer spending in the largest economies are contributing to the price pressures in the services sector. However, the labour markets and wage growth are forecast to soften in 2024 because of weaker economic growth. Consumer spending on non-essential services, such as travel or entertainment, is also forecast to slow down and limit the price growth of services from the demand side.

Geopolitical tensions and trade disruptions remain among the key risks for global inflation

Economic volatility and geopolitical tensions are set to prevail in 2024, in turn increasing the risks of higher inflation. An escalation of the Israel-Hamas war to the wider region could lead to a resurgence of energy prices. A rise in economic fragmentation between China and advanced economies can also add inflationary pressures. Restriction of trade flows, export bans on certain goods or commodities as well as the possibility of restrictive trade tariffs can impact global supply chains. This would result in higher prices of manufactured goods and increased inflationary pressures.