Inflation peaked but will remain above pre-Covid levels: Mastercard

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Inflation has peaked but will remain above pre-pandemic levels in 2023, Mastercard says

Inflation has already peaked, but it can remain above pre-Covid levels in 2023, said David Mann, chief economist for Asia-Pacific, Middle East and Africa on the Mastercard Economics Institute.

“Inflation has seen its peak this 12 months, but it can still be above what we had been used to pre-pandemic next 12 months,” Mann told CNBC’s “Squawk Box Asia” on Friday.

It’ll take a number of years to return to 2019 levels, he said.

“We do expect that we return down within the direction of where we were back in 2019 where we were still debating what number of countries needed negative rates of interest.”

Central banks world wide have been climbing rates of interest as recently as November in response to high inflation.

They include central banks from the Group of 10 countries — corresponding to the U.S. Federal Reserve, the Bank of England and the Reserve Bank of Australia — as well those of emerging markets, corresponding to Indonesia, Thailand, Malaysia and the Philippines, Reuters reported.

The Fed will hold its December policy meeting this week, where it is anticipated to hike rates of interest by 50 basis points. The central bank has raised rates by 375 basis points thus far this 12 months.

“Inflation has develop into that big challenge. It has been spiking and staying very high,” Mann said. But he warned that it could be dangerous if central banks find yourself climbing rates greater than they should.

“The challenge is for those who’ve lost orientation of where the sky and the bottom is, you are not quite sure where you’ll want to find yourself,” Mann said.

It might be a “serious scenario” if central banks “find yourself going barely too far after which have to reverse relatively quickly,” he added.

Consumer spending

Despite high inflation, Mann said, U.S. consumers are still willing to interact in discretionary spending in areas corresponding to travel.

Travel recovery within the U.S. is robust and individuals are still selecting to spend on experiences relatively than material goods, Mann said.

They usually are being frugal about their spending on necessities in an effort to give you the chance to afford non-essentials, he added.

“There’s something behind people’s minds that worries them that regardless that it is not very likely, it’s still possible that those [Covid] restrictions [will] come back,” he said.