The spectre of inflation threatens many major economies

The spectre of inflation has been threatening many major economies in recent months, especially European countries and the US.

ECB's President Christine Lagarde speaking at a press conference in Frankfurt, Germany on September 9. (Photo: Reuters)
ECB's President Christine Lagarde speaking at a press conference in Frankfurt, Germany on September 9. (Photo: Reuters)

President of the European Central Bank (ECB) Christine Lagarde has emphasised that the inflation is temporary; however, analysists are still concerned about the risks of rising inflation and prolonged sluggish economy.

Meanwhile, similar concerns have been raised in the US as the consumer price index has surpassed the "historic" mark of 5% in recent months. According to statistics released in mid-September, the Producer Price Index (PPI) in the US increased by 8.3% in August over the same period last year, while experts are saying that the consumer price index (CPI) of the country in August saw a year-on-year increase of 5.3%. Bleakley Advisory Group’s chief investment officer Peter Boockvar told CNBC that inflation is a big problem for the world’s largest economy because if the CPI is “hotter” than forecast, the Federal Reserve may announce a reduction in its asset purchases right in September, instead of November.

Facing concerns about inflation, leaders of ECB and FED have recently spoke to reassure the public. In her recent interview with CNBC, ECB’s head Christine Lagarde stressed that the rising inflation is largely due to the supply chain disruption and forecast that it “is only temporary and will subside” in the next few years when the world returns to a "new normal".

However, the US and EU financial officials’ belief that inflation will “automatically disappear” has not yet been able to dispel the market's concerns about the risk of prolonged high inflation that can cast a dark shadow on economic prospects. The US press has repeatedly warned that the economy may to fall into “a combination of stagnant growth and rising inflation”. This concern has increased, which was reflected by analysts’ cutting of their economic growth forecast for the third quarter from more than 6% to over 5%.

Furthermore, the prospects for decreased inflation are still uncertain due to the complicated evolution of the Delta variant. Meanwhile, other global difficulties such as the slow development of the leading economies of the US and China, the supply chain disruptions, and the shortages in semiconductor chip supply, have been causing great pressure on major economics around the world, particularly the US and EU.

Translated by NDO