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Inflation has already peaked but will remain above pre-Covid-19 levels in 2023, said David Mann, chief economist for Asia-Pacific, Middle East and Africa on the Mastercard Economics Institute.
“Inflation has peaked this yr, but it will still be above what we were used to before the pandemic next yr,” Mann told CNBC’s “Squawk Box Asia” on Friday.
He said it might take several years to return to 2019 levels.
“We expect to be back within the direction we were in 2019 after we were still debating what number of countries needed negative rates of interest.”
Central banks all over the world already raised rates of interest in November in response to high inflation.
These include central banks from a gaggle of 10 countries – comparable to the US Federal Reserve, the Bank of England and the Reserve Bank of Australia – and emerging markets comparable to Indonesia, Thailand, Malaysia and the Philippines, reported Reuters.
This week, the Fed will hold its December policy meeting, at which it is predicted to boost rates of interest by 50 basis points. The central bank raised rates of interest by 375 basis points this yr.
“Inflation has change into a fantastic challenge. It has increased and stays at a really high level,” Mann said. But he warned that it might be dangerous for central banks to boost rates of interest greater than obligatory.
“The challenge is that if you happen to’ve lost track of where heaven and earth are, you are not quite sure where it’s essential find yourself,” Mann said.
It could be a “serious scenario” if central banks “go a bit of too far after which must turn around relatively quickly,” he added.
Consumer spending
Despite high inflation, Mann said, American consumers are still willing to make discretionary spending in areas comparable to travel.
Mann said the U.S. travel recovery is powerful and folks still prefer to spend on experiences fairly than material goods.
And so they are frugal on necessities so that they can afford things they do not need, he added.
“There’s something within the depths of individuals’s minds that bothers them that even when it shouldn’t be very likely, it remains to be possible that these [Covid] limitations [will] come back,” he said.
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