Inflationary Pressures Have Continued to Ease

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Inflationary Pressures Have Continued to Ease

Recent global central bank meetings have revealed a common message: a weaker economic outlook and lower inflationary pressures justify a pause in the monetary policy normalisation process. In fact, our proprietary inflation Nowcaster for the US turned negative for the first time since 2017. Inflation expectations have remained steady, in the case of survey-based measures, or declined, in the case of market-based measures. For now, inflation seems to be the least of the Fed’s concerns and the FOMC’s more dovish stance is consistent with our own indicators: inflation no longer seems to be an issue.

Source: Unigestion, based on Bloomberg data. Data as at 12.02.2019. The Inflation Nowcaster index is a real-time synthetic measure of inflation surprises. It is computed as a proprietary normalised average of a broad spectrum of indicators spanning the different domains of the economy (imported inflation, production costs and expected inflation). The Inflation Nowcaster takes positive or negative values. A reading above (resp. below) 0 of the Inflation Nowcaster expresses that inflation is growing at a higher (resp. lower) pace than the “normal” inflation (also called potential inflation). Based on the same set of indicators, the Diffusion index is computed as the proportion of increasing ma economic indicators, hence giving an indication of the broadness of inflation pressures. The Diffusion index varies from 0 (all indicators are decreasing) to 100% (all indicators are increasing).

 


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