Weekly Economic Briefing

Technical inflation normalisation

26 April 2016

Global Overview

  • Global inflation rates are in the process of normalising in the near term, but mainly for technical reasons.
  • In the large developed economies, inflation is picking up as base effects from earlier falls in oil prices drop out of calculations. On the more important core inflation outlook, the US and UK are furthest along the path of exhausting spare capacity, which should permit some rise in policy rates over time.
  • Core inflation in the Eurozone and Japan should slowly move in the right direction, but reaching inflation targets by 2018 will be tough and require significant further easing measures. We expect the BoJ to try more shock and awe later this week.
  • The inflation outlook across the BRICs is more mixed. Normalisation in Brazil and Russia equates with falling inflation rates, mostly due to the fading effects of earlier currency depreciation and their deep and prolonged recessions.
  • On the other hand, Chinese inflation is being heavily influenced by the food cycle; pork prices in particular have risen substantially due to shortages but otherwise underlying inflation remains broadly stable and subdued.


Headline inflation is picking up as earlier oil price increases wash out of the numbers. Core inflation is also on an upward trajectory, though not on a scale that will unduly worry the Fed.



UK inflation remains uncomfortably low, although there are signs that reflation is on the way. The Bank will use the labour market as its guide to how sustainable this is.



Eurozone inflation will get an optical boost over the coming months as oil price effects fade. However, the ECB will need to focus on other triggers to be confident that the region is reflating.


Japan & Developed Asia

The net effect of energy and currency movements on inflation is positive but not enough to restore credibility to the BOJ’s forecasts; more policy easing is coming.


Emerging Markets

Inflation is picking up in China due to food supply shortages but is falling elsewhere in the BRICs. The dynamics look positive in Russia and Brazil, while India will be at the mercy of its monsoon.


Standard Life Investments’ Global Strategy team provide regular analysis of the key economic data that has been influencing financial markets.

Available on a weekly basis, the Weekly Economic Briefing takes a detailed look at the global economic issues that have been impacting our investment strategy. The regional approach aims to provide an easy-to-navigate guide to the most recent developments in the global economy.

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