All about the Base: Headline CPI to Pick Up - Nomura
Research Team at Nomura, notes that the commodity prices have continued
to rally since their lows in February, with the WTI hovering around $45 a
barrel.
Key Quotes
“We update our calculations of the impact of changes in energy prices on headline inflation in the G10 countries.
Making
the assumption that oil prices remain at current levels of around $45 a
barrel, we estimate that the contribution of energy base effects to
headline CPI inflation in the US could be +1.5pp by March 2017. We also
find that the base effect will push Eurozone inflation out of deflation
in August, all else being equal (though our real-time inflation tracking
actually puts the Eurozone out of deflation on a rounded basis in May.
Japan has the second-largest base effect in the G10, at 1.4pp, closely
followed by the Eurozone at 1.1pp. Switzerland, the UK, Sweden, New
Zealand and Australia all have considerably smaller base effects. In
terms of timing, base effects start to take hold significantly in the
second half of Q3 2016.
We noted that core inflation in the G10
has been picking up recently. As base effects take hold, central banks
may begin to face rising headline inflation. This is likely to support
consumer inflation expectations, and could reduce somewhat some central
bank easing pressures.”
