Greg Ip´s “tantalizing signs” of a turn in the inflation cycle

GI writes “The Inflation Cycle May Have Turned”:

Central banks around the world have been alarmed at how inflation has plummeted in the last year, in many cases into negative territory. Though much of that is due to oil prices, core inflation, which excludes energy and food, has also been disturbingly low.

But there are tantalizing signs that the cycle has turned. In February, U.S. consumer prices rose 0.2% from January, which pulled the annual inflation rate out of negative territory; it’s now zero. More important, core prices rose 0.16%, which nudged the annual rate up to 1.7% from 1.6%. It was the second upside surprise to core inflation in a row. The driver in January was firmer service prices, this month it was goods.

Looking at the chart for short (1 yr), medium (5 yr) and long (10 yr) inflation expectations estimated by the Cleveland Fed, I couldn´t suppress a laugh!

Tantalizing Signs

Note the much higher volatility of short term expectations, very much influenced by oil price gyrations!

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