Washington: Even the best economists have time and again failed while predicting the top of an inflation, the current wave is no different. Even as most parts of the world are grappling under price rice, according to a Reuters report, recent data has shown that some measures of inflation has cooled down in the world’s two largest economies.Also Read – US Inflation Slows From 40-Year Peak But Remains High
Is the worst over?
After the incorrect prediction that high inflation would be transitory, most central banks have refrained from putting it on calendar when they expect current inflation to peak. But according to Reuters, Federal Reserve officials see inflation decelerating through the second half of the year, the European Central Bank puts the peak in the third quarter, and the Bank of England sees it in October. Also Read – Congress Holds Protests Over Inflation, Unemployment; BJP Calls It Appeasement Politics | Top Developments
Let’s analyse the key points that are shaping the inflation debate. Also Read – RBI Likely To Raise Key Policy Rate By 25-50 Bps To Control Inflation: Report
Consumer prices in China rose less than expected and the factory-gate inflation has slowed to a 17-month low.
In the recent months, we have seen that the prices of key commodities such as oil, wheat and copper and other raw materials have slowed down. Almost a year back, the same energy and raw materials’ prices were the main culprits for the surge in consumer prices.
The US inflation has slowed down in July as gasoline prices dropped, CBS News reported highlighting that “Federal Reserve’s efforts to control spiraling prices are taking effect”. The report quotes Labor Department which said consumer prices rose last month 8.5% from the same month a year ago which was lower than what the economists had predicted and down from 9.1 per cent in June.
“Largely driven by falling gas prices, inflation dipped slightly in July to 8.5%, down from the 40-year high reported in June,” Bright MLS chief economist Lisa Sturtevant said.
Even though the inflation has shown apparent signs of easing, the consumers are still finding it difficult to cope up. July CPI figures show food prices in the United States increased at an annual rate of 10.9 per cent, the fastest rise since 1979, CBS News reported.
European energy bills continue to the burn the pockets of consumers. A large portion of European energy imports relied on Russia for years altogether. The Ukraine war has escalated the tensions between Russia and several nations in the European Union. Energy prices are high in Britain too which has its own gas and the consumers are set to see their power bills jump in October when the current price cap expires, according to Reuters.
Noted U.S. economist Paul Ashworth has pointed out that the semiconductor shortages, which have kept prices of vehicles, electronics and appliances high, are finally easing, meaning that costs for these big-ticket items should continue to decline. This, added to the fact that President Joe Biden signed the $52 billion CHIPS and Science Act to boost the U.S. semiconductor industry, will promote production of microchips that will be a relief to several industries.
39 per cent of the respondents to a global Reuters poll for economists said it’d take longer than next year before the current crisis recedes significantly; the majority 61 per cent believed it wouldn’t.