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According to the Conference Board, disinflationary pressures are not limited to the Eurozone and can be seen across a large number of the “developed economies”. The so-called “Harmonized Indexes of Consumer Prices” or HICP (a measure of inflation that has been standardized based on the EU definition) seems to show consumer prices weakening broadly, with only a couple of exceptions.
The Conference Board: – “While the Euro Area has been nearing the deflationary boundary over the past several months, countries outside the monetary union are not spared that same concern,” said Elizabeth Crofoot, Senior Economist with the International Labor Comparisons program at The Conference Board. “Price growth is nearly zero in Denmark and Sweden, and has once again reached deflationary territory in Switzerland, last seen in May 2013. In contrast, after years of having the lowest inflation rate, Japan—together with Norway—is experiencing the highest inflation among the countries compared.”
|Source: The Conference Board|
In the US the TIPS market seems to agree with this assessment as the breakeven rates remain subdued (see chart). The HICP trend in the next two months will be critical. It will drive the monetary policy trajectory across key economies, particularly in the Eurozone which is now coming to terms with the possibility of QE (see story).