2 December 2022 | Macroeconomics

Inflation may be peaking, but there are doubts about its decline


Central banks have recently been stepping up measures to combat global inflation. Investors, meanwhile, are actively discussing the continuation of high price levels amid limited supply.

Central bank officials have also warned of coming severe inflation. In this regard, there has been a lot of discussion about the expected consequences. Thus, after the key statements of corporate executives now there are new strategies for a post-pandemic world.

At the recent Reuters NEXT conference in New York, Morgan Stanley CEO James P. Gorman said that central banks could make some progress in reducing inflation. Economists must focus on raising interest rates and managing demand. Nevertheless, price increases will be sustained one way or another by various factors, so it will not be easy to get back to the 2% level. 

Gorman also suggested that inflation could become much higher than might be expected. Central banks, by managing demand with interest rates, could probably bring inflation down to about 4%. Achieving further reductions would be more difficult. Four to 2% is a pretty significant change because of supply-side constraints.

According to David R. Malpass, president of the World Bank, inflation will still bother everyone. In April economists had some concerns about possible stagflation, and the spokesman believes it may have already occurred. Speaking about it in an interview, Malpass was referring to a combination of stagnant economic growth and continued inflation.

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