These are just the headline inflation numbers but the trend has been pretty clear over the last six months. If you look back to August last year, we still had near 7% inflation in the UK, with Germany and France still seeing 6% and roughly 5% inflation respectively. In the US, the above figure was 3.7% at the time.
So, the disinflation trend is certainly in play. There is no doubting that. However, the next hurdle will perhaps be an even harder one to cross. The phasing out of base effects and higher energy prices has definitely helped in bringing down broader price pressures. However, to get from 3% to 2% might prove to be a tough task now.
That is not to mention the fact that core inflation is still seen higher than the numbers above for most major economies. As such, it shows the stickiness of services inflation in particular. And that is not something that is easy to "disinfect".
The standout in the pictorial above is Japan though. While all the other major central banks are looking to loosen monetary policy, the BOJ is hoping for the numbers to justify a rate hike instead.
And despite core inflation still working in their favour for now, the trend might not be the case for too long. As seen below, if the disinflation process continues, the Japanese central bank will face a difficult ordeal in justifying normalising monetary policy. And as mentioned before, it is a race against the clock for them.
