World Bank predicts increased interest rates for 2024-25
World Bank warns of prolonged high inflation amid escalating global conflicts and energy price shocks, impacting economies worldwide.
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The World Bank Group recently shared insights indicating that we might experience prolonged high inflation due to certain factors easing off. They mentioned that global commodity prices had been on a downward trend for about two years until recently. However, this decline stopped, and inflation started picking up again, partly because of conflicts in the Middle East.
According to the World Bank Report, commodity prices fell by about 40% from mid-2022 to mid-2023, leading to a drop in global inflation by around two percentage points over the same period. But since the latter half of 2023, things have been changing.
The World Bank's senior president and chief economist, Indermit Gill, noted that despite efforts, global inflation seems to be persisting. He expressed concerns about an energy price shock that could make the world economy vulnerable. Gill also predicted that interest rates might remain higher than expected in the coming years.
The report forecasts a slight decline in commodity prices for 2024-25, but they'll still be around 38% higher than pre-COVID averages. This offers little relief for the global economy grappling with inflation.
Recent conflicts, like the tension between Israel and Iran and the ongoing war between Ukraine and Russia, are making things worse. These conflicts threaten the supply of energy worldwide, which could push prices even higher. The World Bank warns that if these conflicts escalate, the price of oil could shoot up to over $100 per barrel, making everything more expensive for everyone.
Ayhan Kose, another economist at the World Bank, points out that, despite slower economic growth, prices for essential goods are likely to remain higher in the next few years compared to before the COVID-19 pandemic. This means that even though the economy might not be doing great, people might still have to pay more for things they need. This economic analysis highlights the challenges ahead for consumers amidst ongoing inflationary pressures.
In the United States, for example, the economy grew much less than expected in the first three months of the year, while prices for goods and services remained high. This combination of slow growth and high prices is worrying experts, as it could make life harder for many people.
