Global inflation may be approaching its peak, though supply chain disruption may continue to affect living costs, International Monetary Fund Managing Director Kristalina Georgieva said at the Cop27 summit in Egypt.
“We now see central banks very united on fighting inflation as a top priority, and rightly so. If we don’t succeed, it would de-anchor and then the foundation for growth which is price stability is dented,” Georgieva said in an interview with Bloomberg TV.
While the surge in consumer prices following the pandemic and Russia’s invasion of Ukraine is nearing its high point, fragmentation of global supply chains may hamper the ability to push inflation rates to pre-pandemic levels.
“We actually think inflation is going to be harder to bring down to the desirable level of around 2%. Why? Because the drivers of deflation are not only supply [and] demand disruption, but also a changing cost structure that comes from the realization that, no more, we make economic decisions only on the basis of cost,” the IMF said in October. “Supply chain security also matters. If we are going to see diversification of supply chains, that inevitably is going to put some upward pressure on prices.”
The IMF reported that it expected global inflation to peak at 9.5% in the third quarter and then retreat to around 4.1% by 2024.
Investors are watching to see if major central banks will slow their interest rate hikes, which have been implemented to tamp down living cost increases.
Inflationary pressures may prove to be stubborn, The Guardian says, due to ongoing geopolitical tensions and the worldwide rearrangement of manufacturing supply chains. Businesses have taken to sourcing supplies from locations that are closer to home following the pandemic, even if it means paying more for them.