Key Points
The decline in inflation from highs of around 9% to 10% across advanced economies in 2022 represent the easy gains, as supply-chain blockages eased and commodity prices, especially for energy, normalized..
Underlying inflation, which excludes volatile food and energy prices, slowed to 3% in the second half of last year across advanced economies but has since moved up to 3.5%, according to JP Morgan estimates..
Economists and central banks forecasts of sustained falling inflation depend on strong gravitational forces that are not yet validated in global labor costs, short-term expectations, or in recent signals from commodity markets," JP Morgan wrote in a note..
Joachim Nagel, president of Germanys Bundesbank and a member of the European Central Banks rate-setting committee said in late February that underlying inflation in the eurozone was still 2 percentage points higher than its 1999 to 2019 average..
Higher government spending on defense and green energy, and geopolitical tensions that crimp global trade, are likely to pressure central banks to tolerate higher inflation over the coming years, according to a Brookings Institution paper published in March..
