Why is Inflation Below Target in so many Economies?
With only a few exceptions, 2017 has seen inflation falling below target in many major economies such as the US, the Eurozone and Japan. This has also percolated to Hong Kong and is starting to impact China. The year 2017 has also been notable for the failure of wages and inflation in these economies to follow the Phillips curve playbook, for the weaker US dollar trend despite US rate hikes, and for stock markets hitting new highs.
- In the US, how will Fed rate hikes and balance sheet shrinkage, or Mr Trump’s fiscal policies impact the business cycle expansion in 2018?
- In Europe, will the ECB be able to taper its QE purchases in 2018, or is the economic recovery still too fragile, with inflation too low?
- In the UK, will inflation rise further, and can the economy regain its pre-Brexit vigour?
- How is China, and China’s inflation, affected by these global trends?