The fight against the steep price rises unleashed by the pandemic and war in Ukraine has been long and painful, with central banks hiking interest rates at a scorching pace to try to cool inflation.
Some — like the US Federal Reserve and the European Central Bank — have started to signal that they will soon end their cycle of rate rises, and investors have been only too eager to call the end of the campaign, driving stocks higher as a consequence.
But their optimism may be misplaced. Oil and food prices have jumped in recent weeks, and wages are still growing strongly in some of the world's biggest economies. The battle to bring inflation down is far from over.
"It would be foolish for any central bank to declare victory," Randall Kroszner, a former governor of the US Federal Reserve System and now an economics professor at the University of Chicago Booth School of Business, told CNN.
"We've seen inflation come down, but we really need to see that this is something that's going to be sustainably down."
Inflation around the world began to accelerate in late 2021 as economies re-opened after the pandemic. Price rises then gathered steam following Russia's full-scale invasion of Ukraine in February last year as global food and energy prices soared.
Overall inflation has slowed sharply in recent months. In the United States, consumer prices climbed 3% in June — a gentle rise compared with a four-decade high of 9.1% hit a year before. Data due Thursday is expected to show that US inflation ticked up to 3.3% in July. Among the 20 countries sharing the euro currency, consumer prices increased by 5.3% in July, exactly half of the record-high inflation reached in October last year.
Inflation has been higher and stickier in the United Kingdom, coming in at 7.9% last month, down from the 11% it clocked in October, a 41-year high.
Major central banks have jacked up interest rates at a record clip over the past 18 months in a bid to curb price rises, even though the tightening campaign has hurt their economies. A so-called "soft landing" — lower inflation but without a full-blown recession — appears to be within sight in the US and the UK. There are also signs that a mild recession in the euro area may already be over.
While central banks should remain "vigilant," according to Kroszner, he doesn't see "inflation moving back to [the] peaks that we saw over the last year," because some of its driving forces -— including supply bottlenecks and big spending by governments during the pandemic -— are no longer at play.
So why are some prices rising again?
Oil supply cuts
Global oil prices have shot up in recent weeks. The price of Brent oil, the global benchmark, has climbed 16% since a low in late June. West Texas Intermediate futures, the US oil benchmark, have risen 19% in that time.
Richard Bronze, co-founder of data provider Energy Aspects, told CNN that he expected crude oil prices to keep "grinding their way higher" on the back of production cuts by major exporters, better-than-expected global demand and relatively low global inventory levels.
"Demand, although not great, is doing better than many of us anticipated at the start of the year," Bronze said. "We haven't fallen into a serious recession, and consumer demand for things like flights and travel, and the things that really drive up oil demand are holding up well."
But he added that oil prices "are not heading up at the same pace or to the same extremes" as last year.
The International Energy Agency has forecast that global oil demand will rise to a record 102 million barrels this year. But global oil production is expected to rise to 101.5 million, the agency said in a report last month.
Contributing to that supply shortfall are sweeping production cuts announced by OPEC+, an alliance of the world's major oil producers, earlier this year in an attempt to buttress oil prices. Further cuts by the alliance's leading players — Saudi Arabia and Russia — have added to the upward pressure on prices.
Rising oil prices have spurred a jump in US gasoline prices, which hit an average of $3.82 a gallon Tuesday.
Grain deal collapse
Global food prices have tumbled since July last year, when Russia and Ukraine signed a deal to allow the safe passage of ships carrying food and fertilizers from Black Sea ports to the world market.
But Moscow pulled out of that pact last month, arguing that it had been hampered in exporting its own products, and claiming that the main purpose of the deal — to supply grain to countries in need — had not been achieved.
The Food and Agriculture Organization of the United Nations said last week that its global Food Price Index rose in July compared with the month before, notching only the second increase since July 2022.
A jump in the price of sunflower oil after the Black Sea deal unraveled helped boost the prices of vegetable oils more broadly, with that component of the index showing the biggest increase. Ukraine is the world's biggest exporter of sunflower oil, according to the UN.
Inflation in consumer food prices remains high. In the euro area, which releases preliminary data early, it stood at 10.8% in July.
Analysts at Capital Economics wrote in a note Friday that the outlook for the global supply of key foodstuffs had "deteriorated" since the start of the year, and they expect higher prices as a result. Wheat supply, in particular, is likely to fall into a "deep deficit," they said, following the collapse of the Black Sea deal and unusually hot and dry weather in other producing regions this year.
Still, "it appears unlikely that we are going to revisit the peaks in prices reached in the wake of the Russian invasion of Ukraine," they wrote.
Wages still growing
While overall inflation has fallen in recent months, one component — pay growth — has shown striking resilience in the US and the UK.
"Labor costs are by far the most important input for services, and are still very important inputs for manufacturing, so if wage rates are still growing very rapidly, even if commodity prices are coming down, inflation could persist," Kroszner said.
Wages and benefits paid to US workers rose 4.6% in the second quarter from the same period in 2022, outpacing the broader rate of inflation.
Across the pond, annual wage growth in the private sector came in at 7.7% in the three months to May — "materially above" the Bank of England's expectations, it said last week.
"The near-term outlook for pay growth is expected to be stronger than projected" in May, the central bank added in a quarterly report.
With unemployment rates low, and labor markets still relatively tight, Kroszner anticipates wage growth will remain robust in the near term.
"Many firms will continue to meet wage demands because it's so difficult to get employees," he said.
On Monday, Fed Governor Michelle Bowman cited the state of the US labor market as one of the reasons why the central bank might need to persist with rate hikes to get inflation back to healthy levels.
The job market "continues to be tight, with job openings still far exceeding the number of available workers," she said.