Insights

Inflation cools but higher energy prices complicate the outlook for central banks

29 September 2023

This week there have been a number of small victories in the ongoing battle with global inflation. Both Spain and Germany reported prices rising slower than expected, which led to a cooler overall inflation picture for the Eurozone as a whole. There was further good news from the US, as the annual rate for Core PCE inflation, the Federal Reserve’s preferred measure of inflation, came in more or less in live with expectations as it continued its steady decline. Elsewhere, inflation is preparing for a fightback with rising oil prices and a strong US dollar being bad omens for countries that import a lot of their energy, UK and large parts of Europe especially. While this is bad news for central banks, and indeed everyone with a gas bill, these two factors will also be bad for growth, slowing down economies further and hopefully negating the need for more rate rises designed to do the same.