FYI | Jun 21 2006
Consensus forecasts for inflation have been trending higher, Commonwealth Bank economist Nicola Chadwick observes, and with central banks expressing concerns about inflation risks monetary policy tightening remains very much on the cards.
Strong domestic growth and the risk of high commodity price pass-through pose upside risk to inflation, the economist says.
In the US Consumer Price Index (CPI) inflation is now expected to be 3.4% in 2006 and 2.5% in 2007, which is making the Fed uncomfortable. While in the Eurozone, CPI is forecast at 2.2% in 2006 and 2.1% in 2007, extending the 16-month run above the 2% target.
Japanese CPI is now forecast to rise by 0.5% in 2006, up from the previous expectation of 0.4% with the prolonged period of deflation now appearing to be behind it, Chadwick adds.
As for the Chinese economy, GDP growth is forecast at 9.6% this year, with fixed asset investment and money supply growth forecasts being lifted on an almost monthly basis, Commonwealth Bank says, "reflecting the heated nature of the economy."
By Terry Hughes