Europeans can be happy about reaching the price growth target the fastest, according to economists.
Fireworks over Brandenburg in Berlin during last year’s New Year’s celebrations. Photo: Michael Sohn / AP / NTBPublished: Published:
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Call it a Christmas miracle, inflation around the world is easing faster than expected, write The Wall Street Journal (WSJ).
Among the countries that experienced strong price growth after the pandemic – the USA, Europe and several emerging markets, the financial giant Goldman Sachs estimates that price growth will be around the central banks’ target of two percent towards the end of 2024.
– The usual factors that pull inflation down are food, energy, prices of global goods and monetary policy, says senior adviser at Oxford Economics, Michael Saunders, to the news agency.
Falling price growth can give people better advice as goods and services become cheaper. In addition, it could open the way for central banks to start cutting key interest rates.
I think it will be slower in the US
However, how the development will be in different countries will vary according to Saunders, who was also a member of the British central bank’s interest rate committee.
– The differences, and the reason why inflation will return more quickly to the target in the eurozone, is that the USA and the UK are also experiencing greater pressure from tightness in the labor market, which is only gradually diminishing.
A tight labor market means that unemployment is low, and that there is strong competition for labor among companies. This can in turn drive up wages, and potentially prices.
Prices rose sharply
During the pandemic, prices began to rise, but accelerated after the reopening and the Russian war of aggression against Ukraine. The prices of freight, energy, raw materials and food, among other things, skyrocketed.
There were also major imbalances between the world’s production, and a high demand driven, among other things, by low key interest rates at the central banks.
– The demand side was stuffed up by expansionary expansion – The demand side was stuffed up by expansive monetary and fiscal policy, says Hov. monetary and financial policyfinancial policyFinancial policy is a name for the stabilization policy exercised through the state budget. Fiscal policy is, in principle, the most powerful tool modern states have to manage demand in the economy, Marius Gonsholt Hov, chief economist at Handelsbanken, has previously said.
– Everything became very expensive, and it happened very quickly.
Prices are therefore subdued
Omair Sharif, founder of Inflation Insights tells the WSJ that major economies have begun to rebalance.
– Wage growth is cooling off. This is expected to continue in 2024, he says.
Disruptions in the supply chains that contributed to higher prices back in the pandemic era have also subsided.
– Open supply chains helped to reduce inflation towards the end of 2022 and throughout this year, and this will probably continue into next year, he says.
Neil Dutta, head of economic research at Renaissance Macro Research, tells the WSJ that energy prices have fallen again after rising sharply when Russia cut gas supplies in connection with the war against Ukraine.
– Energy and commodity markets adjusted to the disruptions in Ukraine, which helped lower energy prices and stabilize food costs. These forces are expected to continue to affect inflation in 2024, he says.
2023-12-25 21:18:15
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