Inflation will reach 4% next year

Our measure of “core” producer goods inflation continued to accelerate in October and is within touching distance of the multi-decade high reached in late-2022. In response, we’ve revised up our inflation forecasts and now expect headline inflation to reach 4% in the first half of next year. With the labour market still very tight and wage growth the strongest it has been in decades, the case for the BoJ to lift rates into restrictive territory looks increasingly compelling.