It probably goes without saying — hundreds of rate cuts and in some instances unconventional monetary policy since the global financial crisis speaks volumes — but inflation across the world is low. Very low.
Nowhere is it better demonstrated in the chart below from George Saravelos and Rohini Grover, strategists at Deutsche Bank.
It’s the bank’s “inflation sensation” global inflation monitor, a heat map of sorts that looks at inflation trends in major economies around the world.
According to Saravelos and Grover, it captures more than 150 time series covering consumer prices, producer prices, inflation surveys and wages across G10 nations, providing a snapshot of where different countries stand on inflation and the progress the global economy is making in exiting disinflation.
It’s pretty simple to decipher — red means high, blue means ice cold. As the pair muse, it still remains a “sea of blue”.
“The bottoming out in the oil price is yet to show up in inflation trends,” they note.
In what will surprise few, those nations which are currently easing monetary policy are among those dealing with the strongest disinflationary pressures at present.
“The Euro Area, Australia and New Zealand continue to exhibit the strongest disinflationary pressures,” say Saravelos and Grover.
“What stands out in all these economies is the broad-based nature of disinflation: consumer, producer, wage inflation and expectations remain very weak with little sign of turning.”
Japan, having seen a spike in inflation due to the twin effects of the weakening yen and sales tax increase in 2014, is now slipping back towards disinflation.
While it’s still hard to see on the monitor, the pair note that the US and UK are the two large G10 economies exhibiting inflation greenshoots.
“For the US in particular, it is notable that all of consumer, producer and wage inflation have started to trend up,” they wrote.
Given the deep blue colouration for New Zealand and Australia, along with the shift in Japanese inflation pressures, it’s easy to understand why so many believe that recent monetary easing may only be the only the start of things to come.
We’ll find out that answer on Thursday with the Reserve Bank of New Zealand widely expected to cut rates to a record low level of 2.0%.
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