Market Outlook 2018

What could drive global inflation materially higher this year? Output gaps in the US, Eurozone and Japan are apparently closed, yet there is justifiable scepticism about the extent of persistent inflationary tailwinds. For example, although unemployment in the US has been below 5% since early 2016, growth in payroll wages has been a subdued 2.5%. In the last month this jumped to a cyclical high of 2.9%, but this figure is low in comparison with the previous economic cycle. Meanwhile, continued robust job creation implies that there is still some slack in the US economy, even today.

 

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