U.S. “Lowflation” May Continue in 2015
From the Desk of Jim Eccleston at Eccleston Law Offices:
Lowflation, a term created earlier this year by the International Monetary Fund to describe an extended period of ultra-low inflation, can be used as a label for 2014.
For the first time in at least 55 years, not one advanced economy will see consumer prices growing more than 4 percent 2014. Indeed, across the Organization for Economic Cooperation and Development, average inflation excluding food and energy hasn’t breached 2 percent since the start of 2009 -- the longest stretch of weakness since data began 43 years ago.
Furthermore, consensus forecasts for inflation have been trending down since late 2012, the lengthiest run of downgrades since the end of the 1990s.
The Fed’s willingness to raise rates in 2015 faces an obstacle from tightening U.S. labor market and cheaper oil prices. As a result, many economists think the Fed probably will not raise interest rates for a “considerable time.”
The reason that the Fed is worrying about low inflation abroad when unemployment is sliding domestically is that the U.S. increasingly is exposed to foreign price pressures. Central banks in Europe and Japan are set to weaken their currencies next year, forcing up the dollar in response. By doing so, they will export their weak inflation to a U.S. that now is a more open economy than it once was.
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Tags: Eccleston Law Offices, Lowflation, International Monetary Fund
