The highly anticipated jump in inflationhas arrived in different countries across the world. While the sustainabilityof the rise remains open to debate, recent readings on inflation have surged,and key indicators are showing sizable increases in measures of inflationexpectations.

For many, the speed at which inflation hasaccelerated has been the most eye-catching development. In the United States,April's blowout consumer price index or CPI boasted the largest gain in coreprices in nearly 40 years.

Even so, the pass-through of risingproducer prices into CPIs is still in its early stages. In recent months,consumer prices in several of these countries have shown the imprint of higheroil prices, but only in China (and perhaps South Korea) have consumer pricesposted a broader acceleration.

China's CPI inflation has clawed its wayback above zero, with airfares recording a sizable bounce. The country's CPIgrew by 1.3 percent on a yearly basis in May, up from 0.9 percent in April andmarking an eight-month high, with the prices of airline tickets, gasoline anddiesel all rising by more than 20 percent from a year earlier, according to theNational Bureau of Statistics.

But stepping back, we see the evolution ofglobal inflation through the pandemic as broadly driven by shifts in relativeprices more than across-the-board increases in prices.

These shifts started last year with acollapse in global core services inflation, which pre-COVID-19 was averaging2.5 percent, before being decimated by the lockdowns. The shift in relativeprices also affected global core goods, where inflation rose from 1 percentpre-COVID-19 to nearly 2 percent during the pandemic.

An important question is how inflation willrevert as the recovery gains steam. The rebound in services demand is likely topush services inflation back toward its pre-pandemic pace.

Evidence of this has been seen in therecent US and Chinese CPI numbers. The prices charged by the services sectorsof education, culture and entertainment increased by 1.5 percent in May,outpacing the headline growth in consumer prices of 1.3 percent, the NBS said.

In addition, the broad "incomeeffects" associated with the global recovery mean that the demand forgoods (and their prices) should remain solid. Indeed, the upside seemsparticularly pronounced for Chinese households, as the rebound in consumptionhas significantly lagged the industrial sector. The result of all this islikely to be more inflation in the near term.

As the year progresses, however, we expectthat supply will catch up with demand, and bottlenecks in global commoditiesand other goods markets will be resolved. Complementing this dynamic, therebound in services prices is likely to be self-limiting. The demand forservices will not rise indefinitely. And, if anything, it may be a notch softerthan what was seen before the pandemic as economic activity shifts towardvirtual activities.

Over time, deeper structural factors arelikely to reassert themselves, restraining aggregate demand and keeping inflationin check, as before the pandemic. These include aging global demographics,elevated debt levels, and the onward march of technology and innovation.Accordingly, we see price pressures gradually easing later this year and earlynext year.

The global inflation story is one that wewill no doubt revisit often in coming months, and we're cognizant of thefactors that could sustain inflation for longer than we anticipate.

Nevertheless, we expect that the currentfrenzy of inflation pressures will largely abate. Over time, the economicenvironment is likely to resemble what we saw before COVID-19 erupted, ratherthan one where the pandemic has launched a new paradigm of persistentlyelevated demand and higher inflation.

China's consumer price index is estimatedby experts to increase around 1.5 percent in May, Economic Information Dailyreported on Monday.

Due to the carryover effect and the rise inrefined oil prices, China's CPI is expected to rise 1.5 percent year-on-year inMay, said Zhang Yu, chief macro economy analyst of Huachuang SecuritiesResearch Institute.

Zhong Zhengsheng, chief economist of PingAn Securities, predicted China's CPI will rise 1.6 percent year-on-year in May,with pork prices down 9.6 percent month-on-month.

The CPI is expected to pick up to 1.4percent year-on-year, with food prices continuing to fall and non-food pricespicking up slightly, said Gao Ruidong, chief macroeconomist at EverbrightSecurities.

The May Day holiday has led to the recoveryof offline consumption with prices of air tickets and hotels rising generally,and core CPI, which excludes food and energy prices, is expected to furtherimprove, said Zheshang Securities Chief Economist Li Chao.

Industrial insiders believe that thetransmission impact of the current prices rising of bulk commodity on CPI islimited.

The rise of international bulk commodityprices continues to impact on PPI, and hurt the profits of downstreamenterprises, said Tan Zhuo, director of Macroeconomic Research Institute ofChina Merchants Bank.

However, looking ahead, both economicfundamentals and policies do not support large-scale price increases, and thebasis for long-term inflation does not exist, Tan said.

China's consumer price index grew by 0.9percent year-on-year in April, versus the 0.4 percent growth in March,according to the National Bureau of Statistics.

China's factory-gate inflation is close topeaking after reaching its highest level in over a decade and is unlikely tospark a broad spike in consumer prices, officials and experts said.

The country's producer price index, whichgauges factory-gate prices, rose by 9 percent on a yearly basis in May, up from6.8 percent in April and marking the highest level in nearly 13 years, theNational Bureau of Statistics said on June 9.

"Industrial goods prices continued torise due to surging international prices of commodities such as crude oil, ironore and nonferrous metals, as well as a steady recovery in domesticdemand," said Dong Lijuan, a senior statistician at the bureau.

The reading came amid concerns that astimulus-driven rebound in global demand, a hampered supply of commodities andample liquidity conditions may combine to trigger major inflationary pressurearound the globe.

But experts said China's consumer inflationwill remain mild over the rest of the year as the rise in global commodityprices is expected to lose some steam while a moderate recovery in consumerdemand will limit the impact of rising upstream prices on downstream prices.

For instance, the rise in industrial goodsprices only had a modest effect on consumer prices in May. Thoughtransportation costs were elevated by rising international oil prices, thegrowth in China's consumer price index, a main gauge of inflation, has remainedmild at 1.3 percent year-on-year in May, compared to 0.9 percent in theprevious month, according to the NBS.

Long Shaobo, deputy director of the Centerfor Public Economy and Public Policy at Chongqing University, said the upwardpressure of the PPI on CPI should continue to be limited as relatively weakconsumer demand and intense industry competition will dampen companies'tendency to raise prices.

The core CPI, which excludes food andenergy prices and is seen as a better gauge of aggregate demand, grew by 0.9percent in May, up from 0.7 percent in April, indicating that domestic demandis recovering but at a modest pace.

Moreover, the growth in PPI is likely topeak and start declining in the coming months, Long said, thanks to a recoveryin the supply of commodities as the pandemic situation gradually stabilizes andan expected tapering of the US Federal Reserve's monetary stimulus.

With global commodity prices softening,China's full-year growth in CPI may average about 1.5 percent, lower than thegovernment's expected goal of about 3 percent, said Zhu Haibin, JPMorgan'schief China economist.

It is unlikely that the People's Bank ofChina, the nation's central bank, will raise interest rates amid such mildconsumer inflation prospects, Zhu said, adding that the policy rate is expectedto remain unchanged for the rest of the year.

But the soaring prices of raw materialswill continue to put pressure on business profits, particularly for small andmedium-sized enterprises, making structural reforms critical to help them copewith difficulties, said Chen Yanbin, a professor of economics at RenminUniversity of China.

"Efforts are needed to effectivelyboost private investment, ease business burdens and remove investmenthurdles," he said.

The National Development and ReformCommission, China's top economic regulator, held two consecutive meetings onTuesday and Wednesday to formulate more measures to stabilize prices.

The commission will closely monitorcommodity prices, strengthen market regulation over illegal behavior related tohiking prices, and secure the supply of corn, pork and other basic goods forhouseholds, according to statements from the meetings.

At present, the inflation in China featurestwo widening gaps.

First, the gap between the producer priceindex and the consumer price index has been widening. According to the NationalBureau of Statistics, the PPI rose 9.0 percent in May from a year earlier, thefastest growth since 2008, while the CPI growth is still at a low level of 1.3percent. And the core CPI growth is only 0.9 percent, as there are somemoderation in service price inflations. So the gap between the PPI and the CPIlast month reached 7.7 percentage points, which is a record high.

Second, the gap between the producer purchasingprice index and the producer price index is continuously widening. So far thisyear, the former has been rising much faster than the latter. In May, comparedwith a year earlier, the producer purchasing price index rose 12.5 percent andthe producer price index rose 9.0 percent, and the gap is 3.5 percentagepoints.

Which means that the production costs forindustrial enterprises are rising faster than the commodity prices fordownstream customers, and the profit margin for the enterprises is quickly narrowing.

Generally speaking, the current inflationis typical inflation driven by rising costs. As the economic recovery remainsunstable and unbalanced, and demand is still weak however, due to enterprises'reluctance to increase production, the price rises of upstream raw materialshave not yet been fully translated into overall inflation risks. It is themidstream and downstream enterprises that are bearing the brunt of this roundof cost-driven inflationary pressures, and the impact on end consumers has sofar been limited.

The transmission of inflation from the PPIto the CPI has been weakening since 2013 because of some structural factors.Weak domestic demand has posed certain challenges to China's efforts to form adomestic economic cycle.

If the aggregate demand remains weak for awhile, it may drag down the potential growth rate. To avoid that, Chinesepolicymakers have to pay more attention to the demand-side management whilespeeding up supply-side structural reform so as to boost the thriving of thedomestic economic cycle through both supply and demand.

So far, the pressure of the rapid rise ofcommodity prices has been largely dispersed, and the rise of internationalcommodity prices may reach a turning point as the Federal Reserve's monetary policyis expected to change in the third quarter. By then the widening of theaforementioned two gaps in China will be checked to some extent.

Before that happens, China should try toimprove its household spending power.