Inflation: The last mile will be the hardest ... ?
«The easiest wins in the disinflation battle are behind us now that base effects from the previous surge in energy prices have run their course. Indeed, we expect energy effects to lift inflation in advanced economies slightly this year. But we don’t fully subscribe to the popular view that the last mile will be the hardest. If we look behind the headlines to the three-month annualised rates of core inflation, it is very clear that underlying price pressures are easing too. (See Chart 1.) Forward-looking indicators including survey-based price indices, rental agreements and measures of labour market slack suggest that this process will continue as previous policy tightening takes its toll and demand remains soft. We see core inflation falling close to 2% across the major advanced economies by around the middle of this year and think that most central banks will feel comfortable enough to start cutting interest rates in the coming months». Let's hope the folks at Capital Economics are right.