Inflation in developed markets is likely to be stable in 2020 as a rise in energy inflation is offset by a drop in core. We forecast oil prices to rise to over $70pb in the coming years, so energy prices should now begin to positively contribute to headline inflation. But the slowdown in the world economy since the start of 2018 has led to a build-up of spare capacity. As a result, the modest recovery in global growth we are anticipating will not be enough to stoke higher underlying inflation. In fact, with labour market conditions weakening, labour cost pressures are likely to ease, causing core inflation to remain low or even fall in many cases. Overall, headline inflation should change little in 2020 in DMs. Inflation should also be fairly stable in most EM economies, apart from in parts of Emerging Asia where a spike in food prices will push up headline CPI.
Become a client to read more
This is premium content that requires an active Capital Economics subscription to view.
Already have an account?
You may already have access to this premium content as part of a paid subscription.
Sign in to read the content in full or get details of how you can access it
Register for free
Sign up for a free account to gain:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services