Europeans can be happy to reach the goal of faster price growth, according to economists.
Call it a Christmas miracle, inflation around the world is falling faster than expected Wall Street Journal (Wall Street Journal).
Among the countries that have seen strong price growth after the pandemic – the USA, Europe and several emerging markets – financial giant Goldman Sachs estimates that price growth will be around the central banks' target of 2 percent by the end of 2024.
The usual factors that reduce inflation are food, energy, global commodity prices and monetary policy, says Michael Saunders, chief advisor at Oxford University of Economics, to the news agency.
Lower price growth can give people better advice when goods and services become cheaper. Additionally, 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 it develops in different countries will differ according to Saunders, who was also a member of the Bank of England's interest rates committee.
Differences: The reason inflation is returning more quickly to target in the Eurozone is that the US and UK are also experiencing greater pressures due to a tight labor market, which is gradually diminishing.
A tight labor market means that unemployment is low, and there is strong competition for labor between companies. This, in turn, could lead to higher wages and possibly prices.
Prices rose sharply
During the pandemic, prices started to rise, but accelerated after the reopening and Russia's aggressive war on Ukraine. Shipping, energy, raw material and food prices, among other things, have risen dramatically.
There were also significant imbalances between global production and rising demand resulting from, among other things, low key central bank interest rates.
-The order side was stuffed ExpansiveExpansive– Hof says the demand side has been full of expansionary monetary and fiscal policy. cash and Financial policyFinancial policyFiscal policy is the name of the stabilization policy practiced through the state budget. Fiscal policy, in principle, is the most powerful tool at the disposal of modern countries to manage demand in the economy.Marius Gunsholt Hof, chief economist at Handelsbanken, said earlier.
Everything got so expensive, and it happened so fast.
Therefore the prices are low
Major economies are starting to rebalance, Omair Sharif, founder of Inflation Insights, tells the Wall Street Journal.
Wage growth is slowing down. This is expected to continue into 2024, he says.
Disruptions to supply chains that contributed to pandemic-era price hikes have also declined.
– He says open supply chains helped lower inflation towards the end of 2022 and throughout this year, and that is likely to continue into next year.
Energy prices are down again, after rising sharply when Russia cut off gas supplies in connection with the war against Ukraine, Neil Dutta, head of economic research at Renaissance Macro Research, tells the Wall Street Journal.
Energy and commodity markets adapted to the unrest in Ukraine, helping to lower energy prices and stabilize food costs. These forces are expected to continue to influence inflation in 2024, he says.
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