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Policymakers struggle to rein in sticky core inflation

03/30/2023
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Quick Take

  • Core inflation is the change in the cost of goods and services that do not include sectors such as energy and food.
  • They are dismissed due to volatile prices or can fluctuate wildly.
  • Core inflation in the U.S. has only declined 1% point from the peak in March 2021 — while they have a significantly tight labor market.
  • U.S. core inflation is at 5.54% compared to 6.41% last year.
  • In Europe, core inflation doesn’t slow; it continues to rise as wages grow and services remain elevated.
  • Economists have raised their projections for U.S. core inflation.
  • The same is true for the U.K., as core inflation accelerated to more than 6% from 5.7%.
  • The best way to fight core inflation is with positive real rates — which hasn’t happened for almost a decade.
  • Will they bring the economy down to combat inflation?
Euro Core Inflation: (Source: Bloomberg)
Euro Core Inflation: (Source: Bloomberg)
US forecast core inflation: (Source: Bloomberg)
US forecast core inflation: (Source: Bloomberg)
UK Core Inflation : (Source: MacroBond)
UK Core Inflation : (Source: MacroBond)

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