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Global Inflation Tracker: Q3 2022

September 2022

This report examines inflation levels and drivers globally and in key countries. Global inflation is reaching a peak, although geopolitical risks and uncertainty in the energy market remain key risks. The impact varies between countries, with Eurozone markets likely to be the most affected, given its reliance on energy imports. Increasing prices will undermine consumer purchasing power, while persistent inflationary pressures will encourage central banks to tighten monetary policy.

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Key findings

Inflation levels forecast to peak in Q3 2022, but downside risks remain

Consumer price and manufacturer price data suggest that inflation will reach a peak in Q3 2022. Under the baseline scenario, global inflation is forecast to reach 8.7% in 2022 and then fall to 5.3% in 2023. Stabilisation of commodities prices and lower fuel costs are the main factors that will help to cap the inflation surge. However, inflation remains at a high level and will continue to erode consumer purchasing power. Additional supply chain disruptions and potential energy price shocks also remain among the key risks, and could accelerate price growth in Q4 2022.

Potential energy price shocks are the main risk to price stability

Slower global economic growth and weaker demand in China have helped to ease the pressure on energy prices. However, potential punitive supply cuts from Russia and underinvestment in the oil and gas extraction sector could escalate the situation and accelerate price growth. Countries with greater dependency on energy imports, such as Germany, Spain and Italy, will feel higher inflationary effects in 2022 in the event that energy price growth accelerates. This, in turn, is expected to increase inflationary pressures and undermine economic growth in the Eurozone.

Changes in central banks’ monetary policy to impact consumer purchasing power

Changes in monetary policy and a rise in interest rates in many key economies are expected to reduce inflationary pressures through lower demand. However, in the short term, this would further limit consumer purchasing power, as higher interest rates are inflating mortgage payments. The increase in mortgage payments will cause additional headwinds for many consumers, who are already facing higher costs of essential goods, and would reduce consumer spending on big-ticket items, as well as non-essential services.

Introduction

Scope
Key findings

Global outlook

Supply problems and higher energy prices add to inflation
Commodity price growth eases, but challenges in the energy sector remain
Higher energy costs could accelerate price growth for manufactured goods
Key risks for inflation in 2022 and 2023
Inflation forecasts: Q3 2022

Consumer purchasing power

Rising prices undermine consumer purchasing power
Consumer confidence low amid rising economic uncertainty
Median online price changes indicate consumer price inflation is reaching a peak
Tightening monetary policies to impact consumer purchasing power in the short term

Country insights

US: Inflation peaks as energy price growth stalls
China: Stabilisation of supply chains and weaker B2B demand help to cap inflation growth
France: Energy sector regulations to help cap inflation
Germany: Energy prices cause greatest threat to price stabilisation
Italy: High dependence on gas could accelerate inflation growth
Spain: Rising natural gas prices add to inflation surge
UK: Energy price rises and rising food prices add to inflation
Japan: Weak domestic demand helps to cap price growth, but energy supply risks remain
Brazil: Recovering domestic demand contribute to higher inflation
India: Rising commodity prices and robust demand drive inflation growth

Conclusion

Inflationary pressures to remain high
Key country insights
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