Global Inflation to Recover to 2% Level by End of Next Year "Economy Will Be Quite Decent"

WSJ, Outlook Based on Major Financial Institutions' Analysis
End of 3-Year Inflation War Nears
Major Countries Likely to Continue Interest Rate Cuts Next Year

It is forecasted that by the end of next year, inflation rates in most countries around the world will decrease to a normal level of around 2%. The American economic media outlet The Wall Street Journal (WSJ) made this projection on the 24th (local time) by utilizing analyses from economists and major financial institutions.

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Goldman Sachs expects inflation rates in the United States, Europe, and some emerging countries to return to 2%. The inflation targets of the U.S. Federal Reserve (Fed), the European Central Bank (ECB), and the Bank of England are all set at 2%. Sanders, a former member of the Bank of England’s Monetary Policy Committee, stated, "The common factors lowering inflation are the decline in food, energy, and global commodity prices, as well as monetary policy."

Over the past three years, the global economy has battled inflation and war. Stimulus measures by various countries in 2021 and Russia’s invasion of Ukraine in 2022 fueled price increases. Rising housing costs also contributed to inflation. In particular, inflation in the Eurozone peaked at 10.6% in October 2022 when Russian gas supplies were cut off.

The factors driving inflation are gradually stabilizing. Neil Dutta, head of economic research at Renaissance Macro Research, said, "Considering that energy prices have fallen and diesel prices are also decreasing, food and grocery prices are expected to stabilize within the next few months." Wage growth is also slowing, and a similar trend is expected to continue next year.

With inflation easing, interest rate cuts are expected to continue next year. Dutta anticipates that the Fed is more likely to opt for 3 to 4 rate cuts rather than the 6 cuts the market expects, adding, "The economy will be quite healthy, to the extent that it will feel like a soft landing." Bank of America (BoA) forecasts that next year will see 152 interest rate cuts by central banks worldwide, the highest number since 2009.

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