The recent weakness in core CPI inflation in March and April has forced us to revise down our inflation forecasts for the next couple of years. Even if the recent drop in the price of cell phone plans, which explains half of the slowdown, was a one-off it will continue to weigh on the annual core inflation rate until April 2018. Nevertheless, with the dollar stable and unit labour cost growth accelerating, the fundamentals point to a gradual pick-up in core inflation over the next few years.
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