11/27/2015 6:59:24 PM
捷凯金融 - 通缩结束已经出现苗头

Death of Deflation Looms in 2016

Inflation may finally be showing some signs of life in the world’s biggest economies. Economists at JP Morgan say the average core rate of inflation in the 33 economies they monitor is running at its’ fastest pace for 15 years. Core inflation is the measure of inflation that strips out food and energy costs. Core inflation in the 33 countries increased by 2.4%. This fact has given the economists enough confidence to declare the turning point for worldwide consumer prices.

If they are correct it will add a new dimension to currency analysis.

Interestingly, the JP Morgan economists are in good company. The Bank of England Governor Mark Carney, Federal Reserve Vice Chairman Stanley Fischer and Bank of Japan Governor Haruhiko Kuroda have all recently flagged up core price trends. They all suggested that the worst of the global deflation threat may be in the past.

David Hensley, director of global economics for JPMorgan in New York. said: and here we quote: “The gravitational pull is for headline rates to realign with core rates. All the developed-market central banks are looking at inflation below their comfort zone and to see it move up will make them feel better.” and here we end the quote.

 

As they feel more comfortable with inflation rising, central banks will steer away from the ultra-loose monetary policy era. This shift is set to start next month with Fed expected to raise its rates next month. This will be the first interest rate increase in nine years.

The odd man out is European Central Bank chief Mario Draghi. He said recently that he and his colleagues will do whatever is needed to boost price gains.

If JPMorgan is right, Draghi’s job may turn out to be easier than it now looks. Hensley reckons global inflation is on course to reach 2 percent by the end of this year and 2.6 percent in a year’s time, up from as low as 1.3 percent last January.

Goldman Sachs Group Inc. economists are also estimating the average core rate of the Group of Seven nations will move higher in the next two years.

One measure of U.S. inflation is the 10-year break-even rate or the gap between yields on Treasury notes and inflation-linked debt of that same maturity. This has already risen to 1.65 percent from a six- year low of about 1.38 percent in September.

Mark Williams, the chief Asia economist at Capital Economics in London and a former U.K. Treasury official said: and here we quote: “There aren’t many certainties in economic forecasting, but an imminent rebound in global inflation is one of them.”

Behind that confidence is the view that the recent slide toward deflation territory was propelled by the collapse of commodities. This was triggered by an economic slowdown in China.

But that may be changing. Both may be stabilising. In that scenario, inflation on an annual basis should speed up. This is particularly true of economies where labour markets have tightened, such as the U.S. and U.K.

Even lingering commodity weakness may not pack the same deflationary punch as it did in the past. This is because the steep declines that started late last year will begin to wash through on year-on-year price readings. The El Nino weather phenomenon may also boost food prices.

At the headline level, of course, it’s still hard to spot any sign of quickening inflation.

Policy makers have repeatedly predicted inflation to accelerate amid near-zero interest rates and other monetary stimulus programmes. But it has failed to do so.

That is even the case in economies such as the United States where hiring and wages have accelerated. This does raise questions over whether inflation behaves as it once did or risks staying permanently weak.

Whether to care about core prices is also a long-running debate. Those who favour doing so say ignoring transitory elements such as fuel costs provides a better insight into underlying price pressures. Those who prefer to monitor the overall rate argue that it reflects the everyday experience of consumers and companies better.

One advocate for keeping an eye on the core gauge is Bank of England Governor Carney. He told Bloomberg News this month that the U.K.’s negative headline rate is probably skewed by foreign forces. The core measure of 1.1 percent provides insight into domestic inflation.

Governor Carney said: and here we quote: “What we want to avoid is to have cost pressures build up too much domestically to the extent that once these foreign factors ultimately pass through the economy, we’re overshooting that inflation target because of domestic strength.” and here we end the quote.

Also projecting inflation will soon accelerate is Fed Vice Chairman Fischer. Core inflation is edging higher as Americans pay more for services including rents and medical care.

He pointed out in a speech earlier this month that some of the forces holding down inflation in 2015 where due to a stronger dollar and lower energy prices. This will begin to fade from the numbers next year.

UBS Group deputy chief U.S. economist Drew Matus says: and here we quote: “As that happens there could be a rapid, technical, acceleration in overall inflation.” and here we end the quote.

Bank of Japan Governor Kuroda says the nation’s inflation trend is improving. His bank this year is highlighting a new core measure that excludes fresh food and energy costs.

Last week the BOJ said inflation expectations appear to be rising on the whole from a somewhat longer-term perspective.

By contrast, ECB President Draghi is still sounding the deflationary alarm. Mr Draghi said last Friday that, and here we quote: “In making our assessment of the risks to price stability, we will not ignore the fact that inflation has already been low for some time.” and here we end the quote.

In Europe the core picture looks very different from what the headline level shows. The inflation rate in the 19-nation euro area was 0.1 percent in October but the core rate climbed to 1.1 percent. This was the fastest rate of growth since August 2013.

That should help lift the headline rate to 1 percent in coming quarters. And it will make it easier for the doves to argue for additional easing measures next month.

Barclays Plc economists see little reason to fret about a return to the days of prices rising too quickly. They note inflation is beneath 1 percent in 90 percent of the developed markets they monitor. Core inflation will probably remain uncomfortably low through next year. The bank is predicting 2016 core rates of 1 percent in Europe and Japan and 1.3 percent in the U.S.

Economists at Credit Suisse Group have as their base case for core inflation to remain sluggish. But they told clients in a report this month that acceleration in the U.S. would not be surprising.

The Credit Suisse economists said: and here we quote: “Such an increase, especially if it comes amid a rebound in global growth and Fed hikes, could guide markets toward expecting a steeper tightening cycle.” and here we end the quote.

So investors beware. We could see a tightening cycle around the world quicker than we think.

Expert

Alex Heath
策略研究员

金融生涯长约40年,成为LME的一名银&锡交易员是Alex Heath职业生涯的起点。精通于LME基本金属在期货、期权等方面的风险及研究。曾供职于LM...
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