Average inflation in the G7 is likely be over 2% next year as the impact of past falls in energy prices fades. In the US, core inflation is already close to the target and will probably continue rising as the economy approaches full employment. Inflation is also likely to exceed the target in the UK, at least for a couple of years, due to the post-referendum slump in sterling. In contrast, price pressures and core inflation will probably remain very low in the euro-zone and Japan. Against this backdrop, we expect the Fed to tighten monetary policy more than the markets anticipate next year, but many other central banks, including the ECB, Bank of England and Bank of Japan, will be forced to further loosen policy. Meanwhile, the average inflation rate in emerging economies looks set to fall as food inflation declines and the effects of previous currency depreciations unwind.
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:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services