Nora Szentivanyi is joined by Raphael Brun-Aguerre and Dan Silver to discuss the 1H23 global inflation outlook. We anticipate that the slump in manufacturing, fading commodity price shocks and easing supply bottlenecks will drop global goods inflation to 1%ar in 1H23. Regionally, we expect downward pressure to be concentrated in Europe where the benefits of the unwind in the natural gas price shock is substantial. Emerging markets should also see a large drop in goods inflation, helped by a rebound in EM currencies and lagged effects of supply chain normalization. While China’s re-opening is a key reflationary impulse, we do not expect it to disrupt the near-term global disinflation trend.

The drop in goods inflation bolsters the case for a central bank pause. In Emerging markets, central banks are already moving to the sidelines, and we see eight countries cutting policy rates this year. The bar for a pause is higher in DM and will also depend on labor market and wage developments; we see the Fed hiking through 1Q23 and the ECB into 2Q23..

Speakers:

Nora Szentivanyi, Economic and Policy ResearchRaphael Brun-Aguerre, Economic and Policy ResearchDaniel Silver, Economic Research

This podcast was recorded on January 24, 2023.

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