Supply Chain Pressures Have Eased, But Core Inflation Remain Sticky

The Federal Reserve Bank of New York’s measure of global supply chain pressures eased further in February and is not only consistent with the peak in G20 CPI inflation but is also signalling a considerable easing in the months ahead but core inflation is looking more stubborn. G20 inflation moderated slightly in January to 8.4%y/y from 8.5%.

• OECD headline inflation moderated to 9.2% y/y in January from 9.4% but core held at 7.2% y/y. In February so far, headline inflation eased in the euro area and the US but rose in Sweden. But core continued to look sticky with it steady in the US but higher in the euro area and Sweden. Underlying inflation is proving to be a problem for central banks.
• Headline inflation moderated in February in non-Japan Asia to 3.1% from 3.8% and to 5.6% from 5.7% excluding China based on our estimates. Unlike in the OECD, it looks like core eased further to 1.6% from 1.9% and 4% from 4.2% respectively. Both headline and underlying CPI rates remain well below the OECD’s. Thus generally there is less pressure on Asian central banks, except the Philippines, to tighten monetary policy significantly further.

Source: MNI - Market News/Refinitiv

OECD vs non-Japan Asia core CPI y/y%

Source: MNI - Market News/Refinitiv