Having repeatedly been proven wrong over the past year, economists and central bankers have found it uncomfortable to attempt to predict when the current wave of inflation will peak.
However, the question of whether the worst may be over after a year of explosive price growth was expected to be revived by data released recently that indicated that some inflation gauges had moderated in the two largest economies in the world.
Owing to a dramatic decline in the price of gasoline, consumer prices in the United States did not increase in July compared to June. This provided much-needed comfort to American customers on edge due to consistent price increases over the previous two years.
And while consumer prices increased less than anticipated, factory-gate inflation in China slowed to a 17-month low annually.
Most central bankers, including the US Federal Reserve, have given up trying to pinpoint the precise time when they anticipate the present rate of price growth to peak after wrongly predicting last year that high inflation would be a temporary one.
- According to US Central Bank: The second half of the year will see a slowdown in inflation
- According to the European Central Bank: The third quarter will be the peak
- According to the Bank of England: October will be the month
Here are some of the key data molding the inflation debate:
Raw materials getting cheaper
Energy and other raw materials, which were mostly to blame for the rise in consumer prices last winter, could portend lesser inflation this time around.
After surging earlier this year, prices of essential commodities including oil, wheat, and copper have plummeted recently. Following Russia’s invasion of Ukraine, prices for food and oil increased.
Prices dropped as a result of decreased international demand and slowing economies in China, the US, and Europe, where consumers are already battling with high prices.
Fewer businesses are reporting rising input costs, and the increase in wholesale prices is declining in many regions of the world, which is already having an impact on several inflation indicators.
European energy bills not going down
European families are unlikely to see their energy costs decline any time soon as winter approaches the continent. Rationing has recently been discussed in the eurozone, particularly in Germany.
This is due to the fact that gas prices in Europe, which for many years has relied heavily on imports from Russia, are still four times higher today than they were a year ago and very close to record highs. The Nord Stream pipeline’s ability to transport gas has been the subject of much uncertainty.
When the present price restriction expires in October, consumers everywhere—including the United Kingdom, which has its own gas but very little storage capacity—will experience an increase in their electricity rates.
The end of August will witness the expiration of a subsidy at the gas pump, which is bad news for German drivers as well.