Inflation's Odyssey: From Global Panic to Poise

In this week’s video analysis, I look at the inflation dance the world has been grappling with over recent years. Initially dismissed as a fleeting concern during the pandemic, it soon became evident that inflation was neither transitory nor benign.

Asset prices, from stocks to real estate, felt the heat. But now, there's a shift. Global inflation is showing signs of moderation, hinting at a transition from crisis to control.

Canada and the UK serve as intriguing case studies. Both nations, particularly Canada, offer insights that resonate with Australia's economic trajectory. Canada's Central Bank, much like Australia's RBA, has been reactive, adjusting interest rates in response to inflation's whims.

Recent data suggests a cooling trend. For instance, Canada's core inflation (I prefer to use this measure) for September rose by a mere 0.1%, defying market expectations. The UK, despite grappling with severe inflationary pressures, reported a similar trend. Such patterns, if consistent, could herald a more stable economic landscape.

However, there's a wildcard: oil prices. I discussed oil last week in my Aussie dollar overview. Oil’s recent uptick, influenced by global economic dynamics, could disrupt the emerging inflation narrative. If oil stabilises between $80 to $100 a barrel, the world might witness a continued decline in inflationary pressures. But any significant deviation could rewrite the story.

For now, cautious optimism seems apt. The global economy is on a journey, moving from inflationary crisis to potential control.

Peter Esho is an economist and Founder of Esho Group. He has 20 years of experience in investments and markets.