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Inflation Accelerates Globally

Daily Analysis - 19/02/2017

Consumer Price Rise Continues Amid Rebound in Energy Prices

inflation-accelerates


In a sign that disinflationary forces are gradually fading, data from several major world economies showed that consumer prices are continuing to trend higher after the substantial accommodative efforts undertaken by central banks the last few years.

Last Week


Besides the ongoing political shakeup in Washington, global financial markets were tuned in to the latest semiannual testimony from Federal Reserve Chairwoman Janet Yellen as she played a more hawkish policy tune.  As evidenced by her remarks, the US Central Bank is concerned about waiting too long to normalize policy, indicating that the forthcoming March FOMC Meeting may be a “live” event where further rate hikes are discussed.  Supporting this development were headline and core inflation figures reported by the US Census Bureau.  Core inflation has now remained above the Fed’s 2.00% target for the last 15-months while the headline CPI index rose to 2.50%, marking the fastest pace of price growth since March of 2012.

Chinese inflation also topped expectations thanks to rising food prices while UK figures driven higher by increased fuel costs.  However, weighing on sentiment in Europe were GDP figures that were revised lower or printed below expectations.  While optimistic projections for 2017 and 2018 growth and inflation were published by the European Commission, it failed to move investors concerned by the political developments across the region.  To cap off the week, US crude inventories touched a new record, suggesting that the global oil glut remains unsolved.

 

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The Week Ahead


Even though the week ahead will begin with holidays in both the United States and Canada, most of the upcoming reports will be focusing on Europe and North America.  To kick off the week, the Reserve Bank of Australia will be releasing the meeting minutes from the last monetary policy decision.  The Federal Reserve will also be delivering its own meeting minutes from the February interest rate decision, a development which may highlight the more hawkish attitude of policymakers after the latest testimony from Fed Chair Janet Yellen.

Moving back to Europe, both the United Kingdom and Germany will be reported revised numbers for fourth quarter gross domestic production.  At present, consensus is calling for most of the quarterly figures to remain unchanged at 0.60% and 0.40% growth with annualized figures also expected to match the prior reading.  Moving forward, the Euro Area will be releasing the final data for consumer prices during the month of January.  Although headline figures for the monetary union are approaching 2.00%, core inflation remains well below the price stability target set by the ECB.  Canada will also be repeating annualized consumer price inflation numbers alongside retail figures set for delivery earlier in the week.

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