MNI BRIEF: Commodities Likely To Hurt Disinflation- World Bank
Stubbornly elevated commodity prices will make it harder for central banks to cut interest rates quickly this year, The World Bank warned Thursday.
“Global inflation remains undefeated,” said Indermit Gill, World Bank chief economist, in a new report. “A key force for disinflation—falling commodity prices—has essentially hit a wall. That means interest rates could remain higher than currently expected this year and next. The world is at a vulnerable moment: a major energy shock could undermine much of the progress in reducing inflation over the past two years.”
The World Bank’s forecasts call for a decline of 3% in global commodity prices in 2024 and 4% in 2025, a pace that will do little to subdue inflation that remains above central bank targets in most countries and keep commodity prices about 38% higher than they were on average in the five years before the COVID-19 pandemic. The bank forecasts Brent prices will average USD84 per barrel in 2024 before declining to an average of USD79 in 2025, assuming no conflict-related supply disruptions. (See: MNI INTERVIEW: Oil Market Outlook Relatively Balanced)