The war in Ukraine has caused price pressures to intensify again and we now expect global headline inflation to be one percentage point higher on average this year than we previously envisaged. Now is probably the point of maximum pain as fading energy and re-opening inflation seem set to bring inflation down from its current 13-year high as the year goes on. But as labour markets are still very tight, there is a risk that transient pressures morph into more sustained ones as wages are bid up, causing core inflation to settle at uncomfortably high rates. The one reassuring sign is that there is early evidence of an easing in cyclical price pressures in the US, which led the upward charge in inflation last year. Nonetheless, we think that central banks are right to be laying the groundwork for a marked rise in interest rates in the year ahead.
Drop-In: Global inflation – The point of maximum pain (13th April 10:00 EDT/15:00 BST): Join our Global Economics team as they discuss the findings from their latest Global Inflation Watch report - dealing with why inflation looks set to fall, what the underlying inflation risks are, and what central banks will do about it, in addition to your questions on the day. Register here.
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