Swiss investment banking group UBS Group AG predicted that global inflation will peak in the first quarter of 2023.
Then it will decline amid lower economic growth.
Global inflation at 12.1%
“2023 will be a transitional year, with lower growth and lower inflation as the year progresses,” said Ralf Hammers, CEO of UBS Group AG, in an interview with the French-language Swiss newspaper Le Temps. Bloomberg” news today, Saturday.
Hammers added, “The UBS group still expects more interest rate hikes, and then declines in some countries, given that we will have to support growth.”
Switzerland’s relatively low levels of inflation mean the Alpine country will avoid a recession, according to the group’s chief executive, who took over in 2020.
While the main data indicators indicate that the rampant global inflation this year has reached its peak, and the pace of growth of the main prices is supposed to slow in the coming months. Factory prices, freight rates, commodity prices and inflation expectations are beginning to recede from recent record levels. This data series is widely watched by economists and policy makers because it provides an early indication of the trends that will shape the main inflation account.
According to economic researchers, the figures indicate that price pressures on global supply chains are easing, making it likely that headline inflation will ease from the historically high rates that have hit household finance and business activity in recent months.
This would be good news for central banks that have been rapidly raising interest rates in a concerted effort to tame inflation, threatening to plunge major economies into recession.
Mark Zandi, chief economist at Moody’s Analytics, told the Financial Times that “inflation is likely to be peaking”. He noted that the easing of price pressures and supply delivery bottlenecks “harbingers of the upcoming moderation in consumer prices.”
The global inflation rate reached a record level of 12.1% last October, according to Moody’s estimates. Zandi said that would be a “high mark” for consumer prices.
Rising price
Domestic food price inflation remains high around the world. Information for the period July-October 2022 shows higher inflation rates in almost all low- and middle-income countries; As 83.3% of low-income countries, 93% of lower-middle-income countries, and 93% of upper-middle-income countries recorded a rise in inflation levels that exceeded 5%, many of which suffer from double-digit inflation. The proportion of high-income countries that experienced high food price inflation rose to 85.5 percent.
The Food and Agriculture Organization’s Food Outlook on 11 November estimates that the global food import bill will rise to $1.94 trillion in 2022, higher than previously projected. This represents a record high, and a 10% increase over the record level for 2021.
The rise in food prices has caused a global crisis that pushes millions more into extreme poverty, exacerbating hunger and malnutrition. According to a World Bank report, the coronavirus pandemic has caused a major setback in efforts to reduce poverty in the world. Now, rising food and energy prices due to climate shocks and conflict have stalled the recovery.
The number of severely food insecure people in need of urgent assistance is likely to rise to 222 million in 53 countries and territories, according to a report by the Food and Agriculture Organization and the World Food Programme.
According to a document issued by the International Monetary Fund, another $5-7 billion is needed to help the neediest families in the 48 countries hardest hit by soaring food and fertilizer import prices. An additional $50 billion is needed to eliminate acute food insecurity.
Rates will slow in 2023
And a report issued by the National Bank of Kuwait, in early December, said that the latest main indicators issued in the United States, the eurozone, and Australia revealed weak inflation rates in the last week of November 2022, in a recent sign indicating that inflation Global may have already peaked.
And recently, the complex supply chain problems caused by the Covid-19 epidemic and the war in Ukraine have subsided, due to the decline in food and fuel costs, and among the factors that also affect global economies, central banks around the world raised interest rates to historic levels in response to the escalating pace of entrenched inflation that It lasted longer than expected.
Currently, Bloomberg Economics estimates that the worldwide inflation rate will exceed 9.8 percent year-on-year during the third quarter of the year, declining to 9.5 percent in the fourth quarter and finally reaching 5.3 percent by the end of 2023.
However, there are still significant risks in supply chains that have not yet been addressed, in addition to the vulnerability of commodity prices to rise again once economic activity in China fully reopens, and the high cost of living may continue to drive wages to rise.
Darker than expected
And in mid-November 2022, the International Monetary Fund on Sunday sounded the alarm, explaining that the global economy will experience greater gloom than expected, especially in Europe. The International Fund attributed these gloomy expectations to the tightening of monetary policy resulting from the persistence of high and widespread inflation, in addition to the weak growth momentum in China and the continuing imbalance in supplies and food insecurity resulting from the Russian attack on Ukraine.
Last October, the International Monetary Fund lowered its global growth forecast for 2023 from a previous forecast of 2.9 percent to 2.7 percent.
The fund said that the latest indicators “confirm that the outlook is more bleak,” especially in Europe. He added that recent purchasing managers’ indices that measure manufacturing and services activity show weakness in most of the world’s major economies, with economic activity expected to contract amid high inflation.
Moreover, it is expected that the exacerbation of the energy crisis in Europe will inflict severe damage on growth and will raise inflation, which, if it continues to rise, may lead to greater increases in interest rate policy and further tightening of global financial conditions.
This, in turn, poses “increased risks of a sovereign debt crisis for weak economies,” the International Monetary Fund said.
He also added that the multiplicity of dangerous weather events will harm growth around the world.