Only tentative signs of higher inflation - Capital Economics
Global Economics

Only tentative signs of higher inflation

Global Inflation Watch
Written by Capital Economics Economist
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We expect the inflation rate in the G7 economies to average less than 2% this year and next. This is partly because average earnings growth has remained weaker than might have been expected given the recent increase in employment, and also because there is probably more slack in the labour market than the unemployment rates suggest. To some extent, the US is an exception. Its inflation rate should rebound in the next couple of months and the core inflation rate should rise to well above 2% next year. The weakness of inflation in most countries will not prevent central bankers from scaling back their support and/or raising interest rates so long as the world economy continues to expand steadily. We think this is likely, provided the current protectionist rhetoric does not spiral out of control. At the same time we anticipate monetary policy tightening in some emerging markets, but loosening in others.