Global commodity prices are leveling off after a steep descent that played a decisive role in whittling down overall inflation last year, which could make it harder for central banks to cut interest rates quickly, according to the World Bank’s latest Commodity Markets Outlook.
The report also finds that a major outbreak of conflict in the Middle East could halt the inflationary decline that has occurred over the past two years.
It said that between mid-2022 and mid-2023, global commodity prices plummeted by nearly 40 percent, helping drive most of the roughly 2-percentage-point reduction in global inflation between 2022 and 2023.
It said that since mid-2023, however, the World Bank’s index of commodity prices has remained essentially unchanged.
“Global inflation remains undefeated,” said Indermit Gill, the World Bank Group’s chief economist and senior vice president.
“A key force for disinflation—falling commodity prices—has essentially hit a wall. That means interest rates could remain higher than currently expected this year and next. The world is at a vulnerable moment: a major energy shock could undermine much of the progress in reducing inflation over the past two years,” Gill said.