Global inflation slows and raises questions for central bankers

Consumer prices are slowing across the world’s major economies, as more and more countries withdraw their post-crisis monetary policies

 
Mark Carney, Governor of the Bank of England, has stated that he expects to increase interest rates before long, in line with other major economies 
Author: Lujan Scarpinelli
August 4, 2017

Annual inflation in the world’s largest economies slowed to two percent in June, hitting the lowest levels since 2009, according to figures from the Organisation for Economic Cooperation and Development (OCDE) released on August 3. In June, the rate among G20 economies decelerated from 2.2 percent the previous month, according to the data.

In the US, the Federal Reserve has raised interest rates twice this year, and the market expects more to come

The last time prices were below June’s rate was in October 2009, reaching 1.7 percent as the world recovered from the great recession. The slowdown can be attributed to a fall in energy prices and comes at a time when leading economies are beginning to withdraw from the economic stimulus measures they implemented in the aftermath of the crisis.

For example, in the US, the Federal Reserve has raised interest rates twice this year, and the market expects more to come. That said, several Fed officials have already shown concerns about the pace of rate increases. Canada took the same approach in July for the first time in seven years. Meanwhile, Europe is also planning to do so, with the European Central Bank aiming to cut its stimulus programme in the coming autumn.

On August 3, the Bank of England decided to keep rates steady, but Governor Mark Carney estimates that it will raise interest rates soon, at a faster pace than investors expect. This move may take place despite the fact that inflation in the UK is following a contrasting trend, explained by the fall in the pound during Brexit negotiations. According to the OCDE report, estimated annual inflation reached 2.6 percent in the UK in June, while the increase across the Eurozone was 1.3 percent during the same period.