Moody's predicts that global inflation peaked in October and will drop

Global inflation is likely to have peaked in October and is expected to drop as the producer price inflation (PPI), a leading indicator of the consumer price in G20, including the U.S. and Europe, is slowing down.

The Financial Times reported on Sunday (local time) that the PPI, shipping rates, and the increase of energy prices are slowing down in the U.S. and European countries, including Germany and the U.K., and global inflation has peaked. One of the key drivers of inflation, energy price surge and supply chain bottleneck issues are being resolved.

The U.S.’s PPI rose 0.2 percent from the previous month, which is below the market estimate of 0.4 percent. Germany’s PPI decreased by 4.2 percent in October from the previous month. It is the first time in two years for the figure to drop compared to the previous month, and it was the largest monthly drop since 1947. Germany’s PPI increase rate in October is 34.5 percent compared to the same period last year, which is still unusually high, but it is lower than in September when it reached 45.8 percent. The U.K.’s PPI increase rate in October is 19.2 percent compared to the same period last year, which slowed down from 20.8 percent in September.

Moody’s, a global credit rating agency, predicted that global consumer price inflation would take a downturn after peaking at 12.1 percent in October. Economists polled by Reuters expect eurozone inflation to hit 10.4 percent in November, a decline from 10.6 percent for the previous month.

The inflation slowdown is likely to decrease the U.S. Federal Reserve System and other central banks’ pace of interest rate increase. However, many experts also say there is a long way to go until the Fed and other major central banks’ inflation target of two percent.


Hyoun-Soo Kim kimhs@donga.com