Inflation isn’t beaten yet and risks of a new price shock are rising
CNN
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’s main trade routes persists.
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’s main trade routes persists. 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 costs through the roof. “I do think that there is a level of complacency in the financial markets in respect of the inflation outlook,” UBS CEO Sergio Ermotti said Wednesday at the World Economic Forum in Davos, Switzerland, citing higher shipping costs caused by assaults in the Red Sea, which were likely to translate into higher costs for goods. “I can’t imagine inflation won’t suffer from that,” he said. Even before the surge in freight rates had time to feed through to consumer prices, headline inflation ticked higher in the United States, Europe and the United Kingdom in December. The moves upward highlight that getting inflation back down to 2% — the rate targeted by the Federal Reserve and other big central banks — may not be plain sailing.
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