Price pressure still very subdued despite strong growth
Price pressure in most major economies continues to be very subdued –
although the global growth outlook is clearly biased to the upside, capacity
utilisation is rising, and some labour markets are (near) full employment. Nor
has the still-expansionary policy stance of the key central banks (Fed, ECB,
Bank of Japan) (as yet) provided a visible lift to consumer prices.
Since the beginning of the year, the euro area core rate (i.e. Consumer price
inflation excluding volatile energy and food prices) inched up slightly – from
below 1% at the end of 2016 – but recently resumed its downtrend (Nov. 0.9%).
In Germany, the core rate is also pointing slightly to the downside of late (see
chart 37), even though employment (unemployment) is moving from one all-time
high (low) to the next, companies are complaining about a shortage of skilled
labour and increasing difficulties to fill positions and the trend for private
consumption is relatively sound.
Hence, the search for the causes of the on-
going weakness of price momentum in many developed economies (“inflation
puzzle”) continues. There are, in fact, many reasons why inflation pressure has
been so tepid in recent years (see box “Is inflation (really) dead?”).
EU Forecast
euf:ba18h:132/nws-01