Global Disinflation: Is the Last Mile the Hardest?
- ▸Global inflation fell from 8.7% in 2022 to an estimated 4.3% in 2025 — but the final stretch to 2% targets has stalled, driven by persistent services inflation and domestic wage growth.
- ▸Services inflation is structurally harder to reduce than goods inflation because it is driven by local labour costs rather than global supply chains that can recover and normalise.
- ▸The IMF warns that tariff escalation risks reigniting goods price pressures just as the disinflation path appeared to be settling, creating a new complication for central banks.
Between 2022 and 2024, global inflation fell faster than most economists had anticipated. It peaked at 8.7% globally in 2022, driven by energy price shocks following geopolitical conflict in Europe and supply-chain disruptions that long outlasted the pandemic. Central banks raised rates at the sharpest pace in four decades. By late 2024, headline inflation in advanced economies had fallen to around 2.5 to 3.0%. And then, largely, it stopped declining.
Disinflation means the rate of price increases is slowing — prices are still rising, just less quickly. Deflation means prices are actually falling. A controlled disinflation episode is healthy when managed well. Japan spent two decades fighting deflation — persistent falling prices that discouraged spending and suppressed investment — with severely damaging consequences for growth. The challenge in 2025 is that disinflation has stalled before reaching its destination. Headline CPI in several major economies remains in the 2.5 to 3.5% range — well below 2022 panic highs, but above the 2% targets central banks are publicly committed to.
For global emerging markets tracking this dynamic: economies like India that achieved faster disinflation than peers — India's CPI fell from 6.7% in 2022 to a projected 4.2% in 2025 — benefited from a relatively stable currency, good agricultural production, and a central bank that moved early on rate policy. However, global commodity prices and any currency weakness could quickly reverse this progress. Emerging market central banks watching the last-mile problem in advanced economies should note that the services inflation mechanism operates in their own economies too — rapidly rising urban service sector wages can sustain above-target inflation long after supply-side shocks have faded.
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Cite This Article
Khagan Rao. (2026, June 24). Global Disinflation: Is the Last Mile the Hardest?. EconoLens. https://econolens.co.in/news/global-disinflation-last-mile-hardest
Khagan Rao is an economist and analyst specialising in global monetary policy, fiscal frameworks, and international trade. He tracks publications from the IMF, World Bank, BIS, and RBI to deliver accessible, data-driven analysis for a global audience.