Core inflation to remain subdued in advanced nations, likely to gradually accelerate in near future

Global headline inflation seems to have peaked at the beginning of this year as the base effects of higher energy prices has washed out, noted ANZ in a research report. Underlying inflation continues to track sideways and below the targets set by central bank in most instances.

According to ANZ, core inflation is likely to remain subdued in the advanced nations. But it is expected to gradually accelerate in the near future as labor markets become tighter. However, there is certain amount of uncertainty regarding the amount of slack still left in labor markets.

In the U.S., consumer price inflation decelerated to 2.2 percent year-on-year from 2.4 percent in March. But it rebounded slightly in the euro area to 1.9 percent year-on-year from 1.5 percent. Seasonal anomalies are expected to have added to the acceleration seen in the euro area, with March being unusually subdued. China’s headline consumer price inflation accelerated 1.2 percent year-on-year in April, up on 0.9 percent in March.

Producer prices in China continue to ease with the PPI inflation decelerating to 6.4 percent year-on-year in April from March’s 7.6 percent. This was the weakest year-on-year reading of China’s producer inflation in 2017. The deceleration in China’s producer prices indicates towards a weakening in imported-goods inflation and therefore overall global inflation, added ANZ.