Sticky Core Inflation Could Result In Rates Higher For Longer

The IMF revised up its global inflation forecasts in its April report to 7% in 2023 and 4.9% in 2024 from 6.6% and 4.3% respectively. The upward revision was predominantly driven by the developing world. The IMF warned that drivers of inflation could persist until 2025 with core inflation particularly sticky, thus resulting in rates being held higher for longer.

• G20 CPI inflation eased to 8% in February from 8.4%. The Federal Reserve of NY’s global supply chain pressure index fell in March to -1.06, the lowest since the end of 2008, indicating that there is likely to be a further moderation in inflation over the coming months. Despite this, there is concern regarding core price pressures.
• While OECD inflation eased to 8.8% in February from 9.2%, core was steady at around 7.25%, signalling sticky underlying inflation pressures. Thus, further monetary tightening is expected in many economies and talk of easing is premature. US March CPI is released later today and while headline is expected to ease to 5.1% from 6%, core is forecast to rise 0.1pp to 5.6% (see U.S. CPI Preview: April 2023).
• Most of Asia have reported CPI data for March and while inflation in non-Japan Asia including and excluding China has seen a moderation of around 0.3pp to 2.8% and 5.3% respectively, underlying inflation is looking more stubborn at 1.6% and 3.9%. But Asian inflation remains well below that of the OECD and so less monetary tightening has been required. (See Headline CPI Easing But Core Looks Sticky In Some Countries.)

Source: MNI - Market News/Refinitiv

G20 CPI y/y% vs NY Fed global supply chain pressures 3mma

Source: MNI - Market News/Refinitiv