Global Inflation Tracker: Q3 2023

August 2023

This report examines inflation levels and drivers globally and in key countries. Global inflation is moderating, although divergence among the key economies increases. Higher volatility in the energy markets and disruption of agricultural commodities remain among the risks adding to inflationary pressures. Increasing prices also undermine consumer purchasing power, while persistent inflationary pressures encourage central banks to tighten monetary policy.

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This report comes in PPT.

Key findings

Inflation continues to moderate, yet divergence among the regions increases

Under the baseline scenario, global inflation is forecast to reach 7.0% in 2023 and decline to 4.7% in 2024. Slower economic growth and tighter monetary policies, to a large extent, help to ease global inflationary pressures. Yet, divergent inflation trends in the largest economies prevail. Inflation in the Eurozone and developing economies is forecast to remain persistently higher than central banks’ targets in 2024, the result of tight labour markets and commodity price fluctuations. On the other hand, inflationary trends in the US start to cool while China faces a threat of deflation as the country’s economy continues to struggle.

Persistent problems in the labour markets continue to inflate prices of services

Inflationary pressures from the services sector remain elevated as a result of low unemployment in the largest economies and sustained wage growth. In addition, demand for services remains strong, further fuelling price increases. Inflationary pressures in the services sector are forecast to abate in 2024 as tighter monetary policies and weaker economic growth are forecast to restrict discretionary spending. However, long-term challenges in the labour markets will prevail and continue to put pressure on the services sector.

Commodity price fluctuations can renew inflationary pressures on the supply side

Increased commodity supply risks could add to more price volatility in the commodity markets towards the end of the year and add to supply-side inflationary pressures. For example, the expiry of the Black Sea Grain initiative has heightened the supply risks of agricultural commodities. Prolonged supply disruptions could renew inflationary pressures in the food industry. Energy supply risks also remain elevated and could lead to higher prices in Q4 2023, with energy importers in Europe and Asia being particularly vulnerable.

Key findings
Inflation divergence in the largest economies predicted in 2024
Forecast inflation rate in 2024 across countries
Key factors driving inflation in Q3 2023
Prices of manufactured goods remain stable as sellers struggle with weak demand
Tight labour markets and strong demand continue to inflate prices of services
Inflationary pressures in the housing markets cool as tighter monetary policies hit demand
Supply disruptions and adverse weather conditions add to commodity price volatility
Energy prices remain stable yet supply risks remain
Interest rates are likely to peak as inflation is cooling down
Inflation forecasts Q3 2023
Key risks for higher inflation in 2023-2024
Consumer spending power to remain suppressed in 2023 before a recovery expected in 2024
Worsened economic conditions hurt consumer willingness to spend
Online prices of food products indicate declining inflationary pressures in Q2 2023
US: Price pressures level off as tight labour market becomes primary inflation driver
China: Consumer inflation is muted, pointing to weaker domestic demand
France: Food inflation a key driver of persistent and increasing inflation in 2023
Germany: Inflation will remain elevated in 2023 as price pressures ease only gradually
Italy: Numerous persistent price pressures will result in bumpy inflation slowdown
Spain: Inflation is set to moderate markedly due to reduced energy price pressures
UK: Headline inflation starts to ease but underlying pressures persist
Japan: Consumer inflation has peaked, but moderation has been slower than expected
Brazil: Inflation has eased, but the anticipated monetary easing could exert upward pressure
India: Inflationary pressures rise as food prices surge due to unfavourable weather
Inflationary pressures continue to ease
Key country insights


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