BENGALURU (Reuters), – Global high inflation continues. Exercising monetary policy tightening is unlikely to reduce price pressures to required levels. Broken supply chains will also not improve anytime soon.

The rebound in economic activity has led to inflation in many countries reaching multi-year heights. This is due in part to the increased supply chain disruptions and an increase in inflation.

Economists had predicted that inflation would moderate in the coming year, with some signs of supply shocks decreasing, but Russia’s invasion in Ukraine and recent lockdowns caused by an increase in COVID-19 case in China have stifled much of this optimism.

Analysing global inflation data, as well as the New York Federal Reserve’s Global Supply Chain Pressure Index, (GSCPI), that measures supply distortions, revealed a stronger link between inflation and supply chain disruptions than ever before, especially in the UK and the euro zone.

However, there’s a significant delay: While the GSCPI rose significantly to their highest point in Q4 2021 it was months from its peak.

This has made it more difficult for economists to predict inflation, whose forecasts have been constantly on the rise.

“I don’t think the supply chain disruptions are fully reflected in some of the inflation forecasts and that’s probably the reason why we might see forecasts go higher in the coming months,” said Brendan McKenna, international economist at Wells Fargo (NYSE:).

“I still think there’s some catch-up to be done on that front. Banks and even central banks didn’t really fully appreciate the supply chain disruptions we saw last year and might continue to see this year, partly a factor of the Russian-Ukraine crisis.”

GRAPHIC: Global Supply Chain Pressure Index vs inflation https://fingfx.thomsonreuters.com/gfx/polling/movanowjxpa/GSCPI%20vs%20inflation.png

The average inflation projections from 46 countries polled this year is now 3.9% higher than the late 2020 forecast. This was the first time that 2022 inflation predictions were requested.

Medians and ranges also have moved up.

The 2023 forecasts are up 1.1 percentage points per year on average since 2021. The forecasts have increased steadily over the past year and there is likely to be additional increases.

Willy Shih is a Harvard Business School professor and expert in supply chain management.

There is a time delay in supply chains, depending on the distance you travel upstream. However, you will not feel this until weeks or even months later.

GRAPHIC: Reuters Poll – 2022 inflation forecast revisions https://fingfx.thomsonreuters.com/gfx/polling/gkvlgkbxnpb/Reuters%20Poll-%202022%20inflation%20forecast%20revision.png

Although supply chain disruptions are not under central bank control and have an impact on inflation, many banks have started to withdraw ultra-loose money policy in order to manage soaring inflation.

Inflation projections have shown that 29 of 39 economies are impacted by central bank mandates. 16 will be above them next year.

Sticky inflation is a problem that can lead to a slowdown in economic growth and even possible recession. [ECILT/WRAP]

Inflation is a slow killer …. “Inflation can take some time to feed into the demand destruction, and then it slows down,” Elwin de Groot of Rabobank’s macro strategy said. It is difficult to believe that inflation does not cause growth to slow down. That’s impossible.

“Inflation won’t be as structurally low after the global economic crisis or the previous 10-15 years when central banks had a slower rate of inflation; these times might be over.”

(For additional stories in the Reuters global longer-term economic outlook polls packages, click here

Reporting and analysis by Prerana Bhat, Milounee Praohit, Swathi Nagar, Sarupya Ganguly and Anant Chandak; Polling done by the Reuters Polls Bengaluru team and bureaus located in Buenos Aires and Istanbul; Editing by Jonathan Oatis