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Is global inflation nearing a peak?

FRANKFURT (REUTERS) – Calling the top of the current wave of inflation has been a painful exercise for economists and central bankers, who have been proven wrong time and again over the past year.

But data on Wednesday(Aug 10), which showed that some measures of inflation had cooled in the world’s two largest economies, is likely to rekindle a debate about whether the worst might be over after a year of torrid price growth.

US consumer prices did not rise in July from the month before due to a sharp drop in the cost of gasoline, delivering the first notable sign of relief for Americans who have watched inflation climb over the past two years.

And China’s factory-gate inflation slowed to a 17-month low on an annual basis while consumer prices rose less than expected.

After wrongly predicting last year that high inflation would be transitory, most central bankers have stopped trying to put an exact date on when they expect current price growth to peak.

But Federal Reserve officials see inflation decelerating through the second half of the year, the European Central Bank puts the peak in the third quarter and the Bank of England sees it in October.

Here are some of the key data shaping the inflation debate:

Raw materials are getting cheaper

The main culprit for the surge in consumer prices last winter – energy and other raw materials – may be the harbinger of lower inflation this time around.

Prices of many key commodities such as oil, wheat and copper have fallen in recent months, with a Refinitiv index spanning crude oil to orange juice down nearly 20 per cent from its May peak.

The fall mostly mirrors weaker global demand amid economic downturns from China to the United States and Europe, where consumers are struggling to cope with the high prices.

This is already having an impact on some measures on inflation: the share of manufacturers reporting rising input costs is shrinking and growth in wholesale prices is slowing across much of the world.

This should eventually filter through to consumer inflation.