Inflation to rise rapidly in the US, but not elsewhere

Headline inflation in most advanced economies should rise towards the end of this year, when the effects of the past slump in energy prices finally drop out of the annual comparison. Core inflation has already picked up in the US and, with the unemployment rate set to continue falling,it is likely to be well above the 2% target during 2017. We expect this to persuade Fed officials to raise interest rates further than is generally expected. In contrast, underlying inflation should remain well below target in the other major advanced economies prompting policy-makers in the euro-zone and Japan, among others, to loosen policy further. Prospects for inflation in emerging economies vary, but the exchange rates of many commodity-exporting countries should be more stable in the coming year or so, which would lead to falls in headline inflation.