Inflation outlook is benign

Inflation in most major advanced economies is likely to trend towards 2% over the next couple of years. Despite record-low unemployment rates, wage inflation is likely to remain fairly weak in most countries. In addition, oil prices are likely to decline. Even the tariffs which the US has imposed or threatened are unlikely to have much impact on prices. In the US, we expect core inflation to rise to around 2½% next year, but to drop back in 2020 as a result of the monetary tightening which is now underway. Meanwhile, inflation in the euro-zone is likely to rise gradually towards the near-2% target. The one big exception is Japan, where core inflation (excluding the effects of the planned sales tax hike) will probably remain well below the central bank’s target for the foreseeable future.