{"id":22893,"date":"2024-01-21T01:50:53","date_gmt":"2024-01-21T07:50:53","guid":{"rendered":"https:\/\/ustower.net\/?p=22893"},"modified":"2024-01-21T01:50:59","modified_gmt":"2024-01-21T07:50:59","slug":"inflation-isnt-beaten-yet-and-risks-of-a-new-price-shock-are-rising","status":"publish","type":"post","link":"https:\/\/ustower.net\/?p=22893","title":{"rendered":"Inflation isn\u2019t beaten yet and risks of a new price shock are rising"},"content":{"rendered":"\n

Inflation in the US and other major economies has slowed sharply<\/a> over the past year as energy prices retreated from record highs.<\/p>\n\n\n\n

Yet the battle to tame rising prices is not yet won<\/a>, and the risk that inflation could spike again is growing as disruption to one of the world\u2019s main trade routes<\/a> persists.<\/p>\n\n\n\n

Attacks by Iran-backed Houthi militants in the Red Sea mean many container ships, oil tankers and bulk carriers, which transport raw materials, have been forced to take a longer route around Africa, sending shipping and insurance<\/a> costs through the roof.<\/p>\n\n\n\n

\u201cI do think that there is a level of complacency in the financial markets in respect of the inflation outlook,\u201d UBS CEO Sergio Ermotti said Wednesday at the World Economic Forum<\/a> in Davos, <\/strong>Switzerland, citing higher shipping costs caused by assaults <\/strong>in the Red Sea, which were likely to translate into higher costs for goods.<\/p>\n\n\n\n

\u201cI can\u2019t imagine inflation won\u2019t suffer from that,\u201d <\/strong>he said.<\/p>\n\n\n\n

Even before the surge in freight rates had time to feed through to consumer prices, headline inflation ticked higher in the United States<\/a>, Europe<\/a> and the United Kingdom<\/a> in December. The moves upward highlight that getting inflation back down to 2% \u2014 the rate targeted by the Federal Reserve and other big central banks \u2014 may not be plain sailing.<\/p>\n\n\n\n

\u201cIt\u2019s too early to declare victory (over inflation). The job is not yet done,\u201d Fran\u00e7ois Villeroy de Galhau, the governor of France\u2019s central bank, said this week in <\/strong>Davos.<\/p>\n\n\n\n

His comments echoed those of Gita Gopinath, deputy managing director of the International Monetary Fund. She noted that markets were expecting central banks to switch from raising rates at pace to cutting them \u201cpretty aggressively.\u201d<\/p>\n\n\n\n

\u201cI think that\u2019s a bit premature, to (draw) that conclusion,\u201d she said.<\/p>\n\n\n\n

Gita Gopinath (second from left) and Francois Villeroy de Galhau (center) both stressed this week that the job of reining in inflation was “not yet done.”Stefan Wermuth\/Bloomberg\/Getty Images<\/p>\n\n\n\n

At the annual gathering in the snowy Alpine ski resort, several bankers and CEOs cautioned policymakers against cutting interest rates too soon, given a multitude of forces that could drive inflation higher.<\/p>\n\n\n\n

Those \u201cupside risks to inflation\u201d include supply chain fragmentation, trade protectionism, climate shocks and armed conflicts, according to Gopinath.<\/p>\n\n\n\n

Mary Callahan Erdoes, the CEO of JPMorgan Chase\u2019s asset and wealth management unit, warned of another, subtler risk. <\/strong>As soon as central banks start lowering interest rates \u201cpeople feel better, they start spending more,\u201d she said. \u201cYou can have more inflation, instantaneously.\u201d<\/p>\n\n\n\n

In Europe and the United States, central bank officials themselves <\/strong>have been pushing back against the prevailing view among traders that rate cuts are imminent.<\/p>\n\n\n\n

European Central Bank President Christine Lagarde said Wednesday that <\/strong>the bank would likely cut rates only in the summer but that \u201cthere is still a level of uncertainty.\u201d<\/p>\n\n\n\n

\u201cI\u2019m confident that short of another major shock we have reached a peak (in interest rates),\u201d she told Bloomberg TV. Now the bank has to keep interest rates high \u201cfor as long as necessary\u201d to put inflation firmly on the path back to 2%, she added.<\/p>\n\n\n\n

Yet another jolt to inflation could come from widening violence in the oil-producing Middle East, where tensions are running high as the Israel-Hamas war rages.<\/p>\n\n\n\n

In recent days, Iran and Pakistan have conducted strikes<\/a> on each other\u2019s territories in an unprecedented escalation of hostilities between the neighbors. And last week, US and British forces struck<\/a> more than 60 Houthi targets in Yemen in what President Joe Biden said was a direct response to the threat posed to the \u201cfreedom of navigation\u201d in the Red Sea and adjoining Suez Canal.<\/p>\n\n\n\n

Despite the conflicts, oil and gasoline prices have barely budged \u2014 and natural gas prices have fallen \u2014 as weaker demand and plentiful supply\u00a0supersede geopolitical concerns<\/a>.<\/a><\/p>\n\n\n\n

While a potential spike in energy prices is by far the biggest risk to inflation, shipping delays and a sustained rise in freight <\/strong>costs could also pose problems.<\/p>\n\n\n\n

Daily traffic through the Suez Canal has tumbled<\/a> to the lowest level since March 2021 when the canal was blocked by a vessel called the Ever Given<\/a> for six days, according to PortWatch, a platform set up by the IMF and Oxford University.<\/p>\n\n\n\n

Meanwhile, container shipping costs along many of the world\u2019s busiest trade routes <\/strong>have doubled \u2014 and in some cases tripled \u2014 since the middle of December, according to data<\/a> from London-based shipping consultancy Drewry.<\/p>\n\n\n\n

Although those costs are a small component of the price consumers ultimately pay for manufactured <\/strong>goods, if they remain elevated, they could cause global inflation to rise slightly, according to Oxford Economics.<\/p>\n\n\n\n

The disruption in the Suez Canal could last at least another month, Maersk CEO Vincent Clerc warned this week. \u201cThe longer this is going to last, the more this is going to cost,\u201d he told CNN\u2019s Richard Quest<\/a> in <\/strong>Davos.<\/p>\n\n\n\n

The shipping delays and the rise in costs could be exacerbated by a potential shortage of containers. DHL CEO Tobias Meyer said in Davos this week that longer journeys around Africa could, for example, lead to a shortage of containers in Asia in a couple of weeks\u2019 time \u201cbecause that backflow is currently not happening at the pace people were planning for.\u201d<\/p>\n\n\n\n

edition<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Inflation in the US and other major economies has slowed sharply over the past year as energy prices retreated from record highs. Yet the battle to tame rising prices is not yet won, and the risk that inflation could spike again is growing as disruption to one of the world\u2019s main trade routes persists. Attacks by Iran-backed Houthi militants in […]<\/p>\n","protected":false},"author":5,"featured_media":22894,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1155],"tags":[1252,26030,1814,8985,23120],"class_list":["post-22893","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","tag-inflation","tag-new-prices","tag-risk","tag-shock","tag-undefeated"],"_links":{"self":[{"href":"https:\/\/ustower.net\/index.php?rest_route=\/wp\/v2\/posts\/22893","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/ustower.net\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/ustower.net\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/ustower.net\/index.php?rest_route=\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/ustower.net\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=22893"}],"version-history":[{"count":1,"href":"https:\/\/ustower.net\/index.php?rest_route=\/wp\/v2\/posts\/22893\/revisions"}],"predecessor-version":[{"id":22895,"href":"https:\/\/ustower.net\/index.php?rest_route=\/wp\/v2\/posts\/22893\/revisions\/22895"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/ustower.net\/index.php?rest_route=\/wp\/v2\/media\/22894"}],"wp:attachment":[{"href":"https:\/\/ustower.net\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=22893"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/ustower.net\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=22893"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/ustower.net\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=22893"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}