S&P: Rising energy prices could slow deflation pace of in coming months

Median consumer price inflation in developing countries reached 5.3% year-on-year in August, after peaking at 8.2% in the same month in 2022, Report informs, citing a study by the international rating agency S&P Global Ratings.

According to S&P, inflation continues to slow down in most developing countries, although this path is likely to be more thorny in the coming quarters.

"Renewed upward pressure on energy prices is likely to slow the pace of deflation in the coming months, but central banks are likely to continue cutting rates," S&P said.

Core inflation, which exceeds headline inflation in about half of developing countries, is likely to remain high early next year if wage growth is strong in response to prolonged high inflation, agency analysts said.

S&P expects further rate cuts in the coming months, suggesting that central banks will act slowly: “Central banks in Chile, Brazil, Poland and Peru began cutting benchmark interest rates in the third quarter. China and Hungary also eased policy, adjusting some of their monetary tools.

We expect most major emerging market central banks that have not yet cut interest rates to begin doing so in 2024. However, given the uncertain trajectory of inflation and the pace of interest rate normalization by major central banks around the world, we expect a gradual rate cut."