30 Jan 2015
G4 inflation and policy outlook for 2015 – BAML
FXStreet (Barcelona) - The Bank of America-Merrill Lynch Team, uses the BVAR model to forecast the 2015 inflation and policy outlook for G4 economies.
Key Quotes
“The euro area version of the model forecasts a 3Q through in core inflation, although it remains largely range-bound. This is also in line with our euro area team’s views."
“In the UK, however, the model points to a marked core inflation pickup in 2H15 in reaction to rising unit labor costs. While our UK team also expects core CPI to stay close to 1.3% in coming months, they see little, if any, changes in the latter part of the year.”
“For Japan, the model forecasts core inflation settling down at 0.5% later this year, which is where our Japan economist Masa Kichikawa sees ex-fresh food inflation headed if upcoming wage negotiations disappoint.”
“In the US, risks to the inflation outlook will probably seem more balanced by the summer but our forecasts suggest policy communication will be easier if the Fed hikes rates in September rather than June.”
“In Japan, the simulations suggest that risks remain skewed toward further action by the BoJ later this year.”
“Meanwhile, in the UK, model projections showing a wage-pressured rise in inflation seem aligned with the most hawkish expectations in the MPC. At this stage, we look for the BoE to hike rates in August, although risks are for a later move.”
Key Quotes
“The euro area version of the model forecasts a 3Q through in core inflation, although it remains largely range-bound. This is also in line with our euro area team’s views."
“In the UK, however, the model points to a marked core inflation pickup in 2H15 in reaction to rising unit labor costs. While our UK team also expects core CPI to stay close to 1.3% in coming months, they see little, if any, changes in the latter part of the year.”
“For Japan, the model forecasts core inflation settling down at 0.5% later this year, which is where our Japan economist Masa Kichikawa sees ex-fresh food inflation headed if upcoming wage negotiations disappoint.”
“In the US, risks to the inflation outlook will probably seem more balanced by the summer but our forecasts suggest policy communication will be easier if the Fed hikes rates in September rather than June.”
“In Japan, the simulations suggest that risks remain skewed toward further action by the BoJ later this year.”
“Meanwhile, in the UK, model projections showing a wage-pressured rise in inflation seem aligned with the most hawkish expectations in the MPC. At this stage, we look for the BoE to hike rates in August, although risks are for a later move.”