Global headline inflation has fallen sharply from its peak a year ago and, despite a temporary setback due to higher fuel inflation, we expect it to fall a lot further over the coming year. The huge drag from energy inflation is now largely in the past and the Israel-Gaza conflict means there are now upside risks to energy inflation. But lower food and core inflation will now play a bigger role in bringing inflation back to targets, especially in advanced economies. Meanwhile, as the lagged impacts from monetary tightening causes activity to weaken and labour markets to loosen, services inflation should fall in both DMs and EMs. But while DM headline inflation will be back at 2% by the end of next year, the decline in EM inflation will slow from here.
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