Economists warn of the effect on inflation of disruptions in supply chains

Expectations of high inflation have been reduced in all regions of the world, but inflation remains vulnerable to shocks in commodity markets and supply chainsaccording to a report published this Monday by the World Economic Forum (WEF).

Prolonged Red Sea disruption, escalating regional conflicts and rising climate volatility, among other factors, are weighing on the outlook, according to the report, based on a survey of chief economists in both the public and private sectors. and released on the occasion of the start of the Davos Forum (Switzerland).

For example, he details, the arrival of El Niño alone could increase global food prices by up to 9%.

The report highlights how global inflation continues to moderate, which underpins expectations of a “slight decrease” interest rates in 2024 and notes that global inflation rates are expected to reach 4.8% this year, a sharp decline from 5.9% in 2023 and 9.2% in 2022.

Core inflation is also slowing, albeit at a slower pace, and is expected to reach 4.5% in 2024.

This improvement in expectationsis especially notable” in Europe and the United States, where the percentage of chief economists surveyed who expect high or very high inflation has gone from 71% and 47%, respectively, in September to just 13% in both cases in the latest survey.

However, two thirds of those interviewed continue to expect moderate inflation in Europe and the United States and more than a quarter of those surveyed foresee high or very high inflation in Latin America and the Caribbean (26%).

Chinafor its part, continues to be an outlier in the other direction, since 76% of respondents continue to expect low or very low inflation.

These factors are reflected in the evolution of monetary policy guidelines, according to the report, which highlights that although markets anticipate up to six interest rate cuts by the United States Federal Reserve and the European Central Bank (ECB) this year, “monetary policy remains prudent on both sides of the Atlantic”.

According to the chief economists, the degree “unusually high uncertainty“On economic and financial developments means that the timing and extent of monetary policy easing will pose a dilemma for policymakers,”who continue to seek compromise solutions between tightening too much or too little”.

The social tensions accumulated by internal pressures on prices, the prolonged slowdown in economic activity and concerns about financial stability will also weigh on the decisions made in 2024, the report adds.