EM inflation has passed the peak

Having surged for the best part of two years, EM inflation appears to have passed the peak in this cycle. Our measure of aggregate EM inflation dropped from 7.8% y/y in September to 7.4% y/y in October. Looking ahead, we think that inflation will keep easing in most EMs over the coming months, driven primarily by falls in fuel and food inflation (the latter being helped by Russia’s decision to extend the Black Sea grain deal). To be clear, inflation rates are likely to exceed central bank targets for a long while yet, particularly in Latin America and Emerging Europe. As such, rates are likely to stay high for the time being. But the deceleration in inflation – coupled with a worsening growth outlook – could bring policy easing onto the agenda in several EMs by the middle of next year.    

Asia Drop-In (24th Nov.): Our November dive into the big regional macro and market stories will include US-China relations after Bali, Beijing’s steps to ease policy and what to watch for as elections loom in Taiwan, Malaysia and India. Register here for the 20-minute online briefing.