JP Morgan "Inflation Surge Has Eased... Global Inflation Rate to Slow to 5.1% in Second Half"

[Image source= Bloomberg]

[Asia Economy Reporter Park Byung-hee] Expectations are growing that inflation in major countries around the world has peaked.

According to Bloomberg News on the 28th (local time), economists surveyed by Bloomberg expect consumer price inflation rates in major advanced countries, excluding the UK, to peak mostly between July and September.

Economists forecast that inflation rates in the US and Canada, which recorded 9.1% and 8.1% respectively in June, will represent their peaks. Eurozone inflation is expected to decline after reaching 9.0% in September, and Japanese inflation is expected to hold steady at 2.5-2.6% until the end of this year before falling. UK inflation is expected to rise to 11.9% by December this year before declining.

JPMorgan Chase predicted that the global consumer price inflation rate in the second half of this year will fall to 5.1%, about half of the first half of the year. Bruce Kasman, JPMorgan’s Chief Economist, said, "The inflation heatwave is subsiding." JPMorgan especially expects the US inflation rate to drop the fastest among advanced countries, thanks to the strong dollar.

On the other hand, Citigroup released a forecast last week that UK inflation could rise to 18% by early next year.

It is analyzed that inflationary pressures are easing as commodity prices fall and supply chain pressures ease. International oil prices have dropped about 20% compared to early June, and the UN’s food price index plunged nearly 9% in July, the largest decline since 2008. The global supply chain pressure index released by the New York Federal Reserve also fell to its lowest level since early 2021.

Jerome Powell, Chairman of the U.S. Federal Reserve (Fed)
[Photo by Reuters Yonhap News]

However, there are also concerns that recent signs of easing inflation reflect an economic recession.

In particular, in Europe, concerns are growing that natural gas prices, which have risen more than sevenfold compared to a year ago due to Russia’s reduced gas supply, will plunge most European countries into recession this winter. European natural gas prices last week broke records, soaring well above 300 euros per megawatt-hour (MWh). China is also struggling economically due to strict COVID-19 prevention policies and a real estate market downturn.

Morgan Stanley diagnosed that the slowdown in import growth in major advanced countries and weakening exports from Asia, the world’s factory, are signs of weakening demand.

Nevertheless, despite concerns about economic slowdown, central banks are expected to continue tightening monetary policy. Although signs of easing inflation have appeared, inflation itself remains high. Jerome Powell, Chair of the US Federal Reserve (Fed), welcomed recent signs of easing inflation at the Jackson Hole meeting last weekend but said inflation remains much higher than the level desired by central banks and that rate hikes will continue until there is confidence that inflation is under control.

John Plachy, Head of Fixed Income at BNY Mellon Asset Management, said, "Inflation remains a real problem as it is still above the central bank’s monetary policy target level," adding, "Central banks want to avoid the mistake of lowering interest rates and causing inflation to rise again."

Investors expect the US to raise its benchmark interest rate to around 3.75% by March next year. The European Central Bank and the Bank of England (BOE) are also expected to raise their benchmark rates to 1.75% and 4%, respectively.

This content was produced with the assistance of AI translation services.