Energy is cheaper and food prices are increasing at a slower pace.

Inflation is easing in many parts of the world. But it is still higher than the target central banks would like it to be, despite the most synchronised and intense monetary policy tightening in decades.

The Bank for International Settlements now says the global economy is at a critical juncture in the fight against inflation

It warns the last leg of that journey will be the hardest.

Meanwhile, India’s economic and diplomatic power is rising, but, can it compete with China?

Plus, we take a look at Zambia’s “milestone” debt restructuring deal.

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Inflation, the steady rise in prices of goods and services over time, has been a concern for economists and policymakers for decades. Recently, however, there has been a glimmer of hope as inflation rates have started to slow down. But despite this positive development, the fight against inflation seems to be ramping up.

Let’s first take a look at the reasons behind the recent slowdown in inflation. One major factor is the global economic downturn caused by the COVID-19 pandemic. Lockdown measures and decreased consumer spending led to a decrease in demand for goods and services, resulting in a decline in prices. Central banks worldwide also implemented expansionary monetary policies, such as lowering interest rates and increasing money supply, to stimulate economic growth, which further contributed to the slowdown in inflation.

So, if inflation is easing, why are authorities ramping up efforts to combat it? One explanation lies in the fear of an inflationary spiral. While a moderate level of inflation can be healthy for an economy, as it encourages spending and investment, high or rapidly accelerating inflation can have detrimental effects. If people expect prices to continue rising, they may rush to spend or invest their money, creating a self-fulfilling prophecy and driving up prices even further. To avoid such an outcome, policymakers are taking preemptive measures to prevent inflation from spiraling out of control.

Another reason for the increased determination to tackle inflation is the potential negative impact on the economy in the long run. Inflation erodes the purchasing power of individuals and reduces their standard of living. Fixed-income earners and retirees are particularly vulnerable as their incomes may not keep pace with rising prices. Additionally, inflation can lead to higher borrowing costs, discouraging investment and stunting economic growth. By proactively addressing inflation, policymakers aim to ensure stable prices and promote sustainable economic development.

Furthermore, inflation can also have severe social consequences, exacerbating inequality and widening the wealth gap. Those who have significant assets, such as real estate or investments, often benefit from inflation as the value of their assets increases. On the other hand, those who rely on wages and have limited assets may struggle to keep up with rising prices, worsening income inequality. The fight against inflation is therefore also a fight for social equity and economic fairness.

It is essential to note that while inflation is currently slowing, the threat of a sudden surge in prices remains. As economies recover from the COVID-19 crisis, pent-up demand and supply-chain disruptions could lead to temporary price increases. Central banks and governments must remain vigilant to address these potential risks and ensure stable price levels.

In conclusion, although inflation is currently subsiding, the fight against it is intensifying due to concerns of an inflationary spiral, long-term economic consequences, social inequality, and potential post-pandemic inflation risks. Striking a balance between allowing moderate inflation for economic growth and preventing runaway inflation remains a delicate task for policymakers. Through proactive measures and vigilance, authorities hope to maintain price stability and promote sustainable economic development for the benefit of all.