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.
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