This happened in the UK and the US earlier this year, but Moëc says these economies are driven by slightly different factors, with consumer demand a much greater contributor to US inflation.
He says he was sceptical of the view of many in the market that there would be a series of very rapid rate cuts at the end of 2023, but he does believe rates should now be cut.
He adds that if central banks wait too long to decrease rates, “they end up having to cut by more in the future, when that might not be the ideal thing to do”.
Both the UK and the US are due to have elections within the next 12 months, but Moëc does not believe politics will play a role in any decision to cut rates, or otherwise.
He says there is no “empirical evidence” that central bank policies are impacted by elections, because if they try to react to what politicians say, and the democratic will is different, then the central bank will have implemented the wrong policy and for the wrong reason.
Lyons does not believe election cycles have much impact on central bank policy, but says elections can sometimes mean people put off spending decisions until afterwards, and that can have a mildly disinflationary impact.
Zurich chief economist Guy Miller says it is not “inevitable” that inflation will continue to fall, but he feels the available economic data is pointing in that direction, as wage growth and some consumer data points to a slowdown on the demand side.
Zangana predicts the good news on inflation will keep coming in the short term, but he feels “it will be a short window” before inflation begins to pick up again.
He says this is because a number of longer-term inflationary factors exist within the global economy, including ageing populations, the moving of manufacturing closer to home markets as a result of geopolitical tensions, and government actions to achieve net zero are all likely to mean higher inflation over the longer term than people had become used to prior to the pandemic.
A major change in how some economists think about ageing populations is that before the pandemic, many considered that phenomenon to be disinflationary, as older people tend to spend less than younger people. However, since the pandemic economists have become more aware of the impact of older populations on the labour market, as fewer workers in an economy means wages tend to rise.
Miller says the medium-term outlook for inflation could be impacted by the economic downturn in China, with that economy focusing on exports and “being able to export goods cheaply”, and that this could contribute to lower inflationary impulses in the years ahead.
