Inflation appears to have peaked in most major economies, but it remains uncomfortably high and well above target levels, and is likely to persist above target levels into 2024.

Central banks are not arguing that the inflation problem has been resolved, but markets are forward-looking and see the risk of a harder landing, leading to lower inflation in 2024.

There is some positive news for the US, as the headline annual inflation rate has decreased for 9 consecutive months, and core inflation has eased for 5 consecutive months. While there may be a few more months of easily achieved wins for headline inflation, core inflation may plateau for a while before gradually decreasing, but still remaining above target. Similarly, inflation in the UK and EU is proving to be more persistent and volatile.

Our inflation monitor continues to provide some room for hope (particularly for the US):

  • Money supply growth (M2) has eased in the US, with the Year-on-Year rate at -2.35%.
  • Global supply chain pressures decreased yet again in February and are now below the historical average, according to the New York Fed Supply Chain Index.
  • This supply chain index showed significant downward contributions from the majority of the factors, with the largest negative contribution from European area delivery times.
  • Commodity prices have continued to weaken: oil, natural gas, industrial metals and agriculture are all well off their peak levels.
  • Freighter and container pressures have also eased considerably and are heading back towards pre-Covid levels. Lower demand will help in the coming months. As an example, the Baltic Global Container Index has fallen from a peak of $11,100 to under $1500.
  • Inflation expectations, which are closely watched by the FOMC (Federal Open Market Committee), have continued to edge lower.


To find more about the latest house views from London & Capital’s Investment Desk, read the full AndPapers Q2 2023 here.

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