I follow very closely the inflation projections from various federal agencies. Here, is a summary outlook from recent projections.
The pandemic has caused service prices to fluctuate more than usual. When the various restrictions were introduced, they held back price developments on services, such as hotels and restaurants. Once the restrictions were eased, it meant that demand for services increased rapidly and prices rose. Several companies have also experienced difficulties in re-recruiting staff or recruiting new staff, as people have changed branch or retrained during the pandemic. The sector has also faced higher costs in general. However, service prices are not expected to continue rising as quickly going forward. For one thing, lower demand, together with tighter monetary policy, is expected to contribute to a lower rate of price increase going forward. Costs are not expected to continue rising as quickly going forward, either. As with goods excluding food, the monthly price increases on services in the consumer channel have slowed down somewhat in the United States and the United Kingdom, and this is even more clear in Sweden and the euro area.
All in all, there are indicators pointing to prices not rising as much as they have done recently.
Forecast is that inflation will fall relatively rapidly next year (2024) All in all, several factors indicate that inflation will fall relatively rapidly as early as next year. This is not an expression of prices ceasing to rise, but that they are not expected to rise as much as they have done over the past year. This in turn is a combined result of the effects from certain supply factors waning, inflation in general dampening and of monetary policy being adapted to avoid a domestically generated price wage spiral. However, there is considerable uncertainty over the forecasts at present. One example is developments in energy prices, where the forward market indicates a downturn. If energy prices instead continue to rise, this could lead to a new wave of cost increases and indirect effects, which in turn can dampen the fall in inflation.
Let’s hope these projections come true, as we start to see some light through the tunnel.
Stay tuned for more updates…
Busy And Useful 