FX.co ★ Inflation shows signs of cooling

According to Business Insider, a decline in the commodity market indicates a possible slowdown in consumer price growth. However, this is a double-edged sword. Thus, it is too early to talk about the impact of this process, the global news publication emphasizes.

By now, commodity prices have slumped to pre-crisis levels posted before the outbreak of the conflict in Eastern Europe. Against this background, many market participants expect inflationary pressures to ease.

On July 11, oil prices tumbled to a four-month low, and copper prices fell by 30%. Agricultural prices were also part of a sharp sell-off in the commodity market. In particular, wheat lost 40%.

The average inflation rate over the next five years is expected to come at 2.5%, well below projections of 3.5% in March. However, the current drop in oil prices is a mixed blessing, experts believe. The point is that investors are getting rid of a number of commodities amid a potential slowdown in economic growth, while banks are anticipating a global recession.

Notably, Nobel Laureate economist Paul Krugman dismisses the risk of stagflation and says that concerns over runaway inflation are extremely overblown. “Fears of inflation are greatly exaggerated ‹…› Market expectations are way down,” he noted.