Global Inflation Tracker: Q2 2023

May 2023

This report examines inflation levels and drivers globally and in key countries. Global inflation is moderating, although volatility in the energy markets and faster consumption growth in China are among the key risks that could increase inflation. Rising prices are also undermining consumer purchasing power, while persistent inflationary pressures are encouraging central banks to tighten monetary policy.

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This report comes in PPT.

Key findings

Inflation forecast to continue to moderate in 2023

Under the baseline scenario, global inflation is forecast to reach 6.8% in 2023, and then fall to 4.4% in 2024. Slower economic growth, stable commodity prices, supply chain improvements and moderating housing prices contribute to the slowing inflation. However, inflation in the largest economies is forecast to remain above the targets set by the central banks. To combat inflation, central banks are expected to continue to tighter monetary policies in 2023. Faster economic growth in China and volatility in the global energy markets remain among the key risks that could accelerate inflation in the second half of 2023.

Upward inflationary pressures from the services sector remain high

Prices of services are forecast to maintain growth in 2023-2024 and contribute to the global inflationary pressures. Relaxation of pent-up demand after the COVID-19 pandemic, tight labour markets and sustained wage growth are contributing to the higher prices of services and adding to non-core inflation, which excludes food and energy price fluctuations. Education, healthcare services, retail and entertainment services are some of the most labour-intensive sectors, and will feel the highest pressure from rising wages.

Consumer confidence remains low as inflation erodes income gains

Real disposable consumer income is forecast to stagnate, growing by just 0.4% in 2023. Still high inflation rates will significantly erode consumer income gains, resulting in stagnating real disposable incomes. Weak consumer purchasing power, combined with higher interest rates, is forecast to have a negative effect on consumption in 2023, primarily affecting consumption of non-essential services and purchases of big-ticket items.

Key findings
Inflation rate forecast to moderate but remain above target in 2023-2024
Forecast inflation rate in 2023 across countries
Key factors driving inflation in Q2 2023
Stable commodity prices contribute to moderating supply-side inflation
Rising prices of services continue to add to the inflationary pressures
Labour market challenges significantly inflate prices of services
Weaker demand and improving supply helps to ease housing price pressures
Housing prices in the largest urban areas remain elevated
Accelerating consumption in China could add to inflationary pressures in Q3 2023
Central banks expected to continue tighter monetary policies
Inflation forecasts Q2 2023
Key risks for inflation in 2023
Inflation and slower wage growth to erode consumer spending power in 2023
Low consumer confidence hurts willingness to spend
Online prices of food products continued to moderate in Q1 2023
US: Inflation to slow markedly, while some underlying pressures persist
China: Inflation slows further as recovery in domestic consumption falters
France: Inflation to remain stagnant amid broad-based price pressures
Germany: Inflation will remain significantly elevated as multiple price pressures persist
Italy: Ongoing energy price volatility contributes to persistent price pressures in 2023
Spain: Inflation is set to moderate markedly due to reduced energy price pressures
UK: High food prices keep inflation elevated, but pressures are projected to ease
Japan: Headline inflation continues to ease, but upside risks persist
Brazil: Falling energy prices help to curb inflation growth
India: Inflationary pressures subside owing to weaker food and fuel price rise
Inflationary pressures moderate, but core inflation remains high
Key country insights


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