People around the world are experiencing inflation not seen in decades, and the prices of necessities such as food, transport, accommodation and heating are soaring compared with a year ago. Many economists believe that global inflation has peaked, but it may be difficult for high inflation to fall significantly in the medium term, and the negative impact may be worse.

Since mid-2021, the global inflation situation has shifted from "mild" to "high fever"Now a number of statistics show that global inflation is showing signs of peaking, but the data also show that global inflation is still relatively high. It also means that while inflation data are slowly falling back from decades-long highs, it will still take time and patience to reach normal levels, which still means that inflation will remain a big problem for central banks around the world in 2023.

With regard to global inflation, the following chart shows that global inflation reached a three-year high in November, the highest level predicted by some economists against the backdrop of global inflation.

How did the global economy get to the stage of high inflation?It is inseparable from two key words: COVID-19 epidemic and geopolitical unrest.After the COVID-19 outbreak, some governments and central banks used trillions of dollars in support to maintain normal lives for blocked companies and households, but since the beginning of this year, the long-term comfort period of low inflation and low interest rates has come to an abrupt end.

The "two-pronged" approach of government relief measures and the huge amount of liquidity released by the central bank has enabled the group of workers to continue to work normally, save companies from bankruptcy and property companies from collapse. However, these macro-control measures have also destroyed the balance between supply and demand in the market for many years.

By early 2021, everything seemed to have changed. As the global blockade ends and the global economy grows at its fastest pace since the recession in 80 years, all this stimulus money has flooded the world trading system.

Idle factories are unable to produce quickly to meet high demand, and factors such as new safety rules implemented after COVID-19 's outbreak have led to labor shortages in basic areas such as retail, transport and health care. at the same time, energy prices have soared as a result of the global economic recovery. Since then, the conflict between Russia and Ukraine broke out in February, when the West imposed unprecedented sanctions on the major oil and gas exporter, further pushing up global energy prices.

High inflation hits ordinary consumers, and strikes may be staged one after another.

The double-digit inflation rate is called the "poor tax" by some market observers because it hits low-income people hardest and exacerbates inequality around the world. Generally speaking, wealthier consumers can rely on the savings accumulated during COVID-19 's epidemic. The sharp rise in share prices after central banks such as the Federal Reserve have "opened the floodgates" has also led to a surge in their wealth, but others are struggling to make ends meet. more and more people rely on cheap necessities.

Zhitong Financial APP has learned that the cost of living in the region will be squeezed even more as fuel prices continue to soar as the cold winter approaches across the northern hemisphere. Workers in transport industries ranging from health care to aviation have been on strike around the world, demanding wages to keep pace with inflation. Tens of thousands of South Korean truck drivers who took part in the strike demanded a significant improvement in the wage system and expansion of its coverage. In most cases, however, they will have to accept lower wage increases.

The issue of the cost of living dominates politics in rich countries-in some cases, other priorities, such as climate change action, are left behind.

Although the recent drop in gasoline prices has eased some of the pressure, reducing inflation remains a top priority for the administration led by President Joe Biden. The government led by French President Jean-Claude Macron and German Chancellor Gerhard Schultz is expanding its budget to spend billions of euros to support consumption plans.

But if industrialized economies are struggling, soaring food prices from Haiti to Sudan and from Lebanon to Sri Lanka are exacerbating poverty and suffering in poorer countries.

The World Food Program expectsSince the outbreak of the conflict between Russia and Ukraine, the global population has surged by about 70 million people facing famine, which the group calls the "hunger tsunami."

"soft landing" may become an extravagant hope! The global economic situation is likely to be more pessimistic in 2023

Central banks around the world have begun to raise interest rates sharply to cool demand and step up efforts to rein in the highest rate of inflation in decades. The IMF expects global inflation to fall to 4.7 per cent by the end of 2023, slightly less than half its current level, but still well above the target of most central banks.

After inflation surged faster and lasted longer than economists expected this year, big interest rate hikes by central banks around the world may also start to have an impact, although some of the effects may lag.The statistics in the chart below show that central banks around the world have launched an aggressive "water collection" model to curb the upward rate of inflation so far this year. After the Fed began raising interest rates by 75 basis points in June, central banks around the world followed the Fed in sharply tightening the loose monetary policy since the COVID-19 epidemic.

The goal of central banks around the world is very consistent-to achieve a "soft landing" of the economy, that is, a sharp drop in inflation without a collapse in the housing market, corporate bankruptcies or soaring unemployment. But this best expectation has proved difficult to achieve in times of record high inflation in the past, and a recession seems inevitable. At present, Wall Street generally estimates that the probability of the United States falling into recession next year is as high as 50%.

From Federal Reserve Chairman Powell to European Central Bank President Christine Lagarde, a growing number of central bank leaders believe that the drastic increase in interest rates could be very bitter. Most importantly, the tail risks surrounding major uncertainties such as the conflict between Russia and Ukraine and other geopolitical events tend to become more severe.

"in short, the worst is yet to come, and for many people, 2023 will be a recession," the International Monetary Fund (IMF) said in its conventional October outlook, one of the darkest economic prospects in years.

IMF kept its forecast for overall global economic growth this year unchanged at 3.2 per cent, but lowered its forecast for next year to 2.7 per cent, predicting a broad global slowdown in 2023 and a recession in countries that account for about 1/3 of the global economy this year or next.

Well-known economists predict that the future will not only face recession, but also the "cascade effect" that will cause market shocks.

Mohamed Mohamed El-Erian, a well-known economist and former CEO of Pacific Investment Management (PIMCO), an influential investment firm, and chairman of the Global Development Committee during the Obama administration, expectsThe world is not just teetering on the brink of another recession, it is in the midst of a deep economic and financial transformation.

He cites the economic theory that a recession occurs when one business cycle reaches its natural end and the next cycle does not really begin, but he says this will not be another turn of the "economic wheel". Because he believes that the period of major change the world is going through "will last longer than the current business cycle". He highlighted three trends that showed that a fundamental transformation was taking place in the global economy and financial system. The first shift is from insufficient demand to insufficient supply; the second is the end of unlimited liquidity by global central banks; and the third is the increasing fragility of financial markets.

Mr Erian believes this helps explain "many unusual economic developments in the past few years" and sees greater uncertainty as shocks to the economy "become more frequent and violent". Erian concludedLooking forward, these changes mean that the ultimate consequences will be harder to predict. This does not necessarily mean a simple result, but a reflection of the "cascade effect"-that a single bad event can lead to a series of accidents.

Erian is not the only economist who points out that the world economy will face multiple threats in the future. Nouriel Roubini, a senior economist known as Dr. Doomsday, and Adam Tooze, a financial historian, are two other celebrities who warn of interrelated threats. Roubini said in a recent interview that he and Tooz described a similar set of phenomena, but he did not mention Erian's critical comments. However, like Erian,Roubini explains the multiple factors that can work because they are so interrelated that they will have a domino effect in the future, and a possible recession is only one of the consequences.