The lack of inflationary pressure is something of a puzzle for economists as conventional patterns based on the accepted theory of the Phillips Curve are not playing out as expected, explains George Buckley, chief UK economist at Nomura
Over the past year the global recovery has stepped up a gear. For sure, there have been wrinkles; some of the recent business survey evidence and official activity data in Europe have slowed, for example, but in general economies are recovering well.
Consensus expectations for 2018 economic growth in the US and Japan have been raised by half a percent over the course of the last year (the former may rise further thanks to President Trump’s aggressive tax and spend policies), while for the euro area the upward revision has been nearly a full percentage point.
Even in the UK, where the Brexit process looks to have held back the economy relative to its peers, this year’s growth expectations have been lifted by three tenths relative to what economists were expecting a year ago.
