Our sluggish disinflation

WHAT goes up must come down. This truth also applies to economic trends, which exhibit cycles of ups and downs. However, the pace of going up and coming down depends not on gravity, but economic policies. We are now seeing the effects of higher interest rates, which are slowly taking the steam out of inflation in the consumer price index (CPI). Year-on-year inflation has come down from its peak of 38 per cent in May 2023 to 17.3pc in April 2024. How long does it take to contain high inflation and to lower it? If we take high inflation to mean anything higher than 15pc, then the current spell has been persisting for the last 22 months. The bad news is that in our inflation history, we have witnessed CPI inflation persist above 15pc, peaking at 29.3pc, for 28 months straight — from July 1973 to November 1975. Let us hope that this inflation history does not repeat itself in terms of the length of that spell. If we take high inflation to mean anything in the double digits (10pc or higher), then we have experienced a spell of high inflation that lasted for almost 46 consecutive months during 1972-1976.