2% inflation target remains elusive

Headline inflation has been falling recently as the impact of the short-lived spike in food prices over the winter has reversed. Energy inflation has continued to slow as utility bills are rising less rapidly and the recent surge in crude oil prices has yet to lift gasoline and heating oil inflation. “Core” inflation is falling too – a disappointment for policymakers when wages have recently been rising at the fastest pace in two decades. Some of the fall in “core” inflation can be attributed to the renewed strengthening of the exchange rate but service inflation hasn’t picked up.