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The cost of living crisis won't necessary end as inflation declines

It's been a challenging few years. The aftermath of the pandemic, coupled with the ongoing conflict in Ukraine, has brought inflation to levels not seen in over four decades. The resultant economic strain from a severe cost-of-living crisis has impacted everyone, making these past years particularly difficult.

Currently, headline inflation is gradually receding. Some central banks, particularly those in emerging markets, have initiated interest rate cuts, as evidenced in the remarkable heat map of interest rates by the Financial Times. Many more are anticipated to follow suit this year, including the US Federal Reserve, the European Central Bank, and the Bank of England.

However, this doesn't signify a resolution. The situation remains arduous. While inflation may be decreasing, prices remain elevated, with ongoing increases, albeit at a slower pace than before. Thus, the challenges persist.

Indeed, the threat of inflation remains, with the potential to escalate to previous levels or even surpass them. Geopolitical tensions persist as a constant inflationary risk. Moreover, indications of increasing manufacturing activity worldwide could lead to a resurgence in commodity prices.

Source: Financial Times

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