During the 2nd Half of this year, our team predicts higher inflation rate that gonna shoot up from extremely artificial low Levels, Particularly in a advance economies that includes certain Asian Countries like India & China. The Basic Factor Remains is the economic release from Crude oil Prices
Besides the Consumer Inflation Index (CII), rising trend market upheld in advance economies of US, UK, Germany & Australia that showed a sign of rising Wage Growth. On the other hand In Most of the Emerging Markets, Inflation is likely to remain on higher side. From Our View Point, Central Bank Policy of respective country will continue to diverge its inflation rate. The robust Combination coupled with Intensive Growth Rate and a backfire in inflation rate which might leads to increasing policy Rates in The economies like US and UK. While The Central Bank of Emerging Economy might rises their rates in order to level their inflation. While in Certain Context, Central Banks lying under the belt of Eurozone Region and in APAC Countries are much likely to put their policies, Stagnant or Put Further at ease.
In Regards to Inflation, that’s shown a down trend in most of the Developed & Emerging Economies in the First Half of this year in relation to previous year. The Downtrend In Prices of Oil, Food & Some Basic Commodities have drastically reduced the Economical Headline term “inflation” while some economies tends to be juggling around showing the trend of Disinflation in China, Switzerland & Some Countries of Eurozone. While some emerging markets that includes Russia, India, Brazil, Turkey, Indonesia & South Africa embarks the depreciation of their Currency, On the other hand, other Economic lagging indicators like tariff Rate Hikes, Country Economic lending Policy, CPI, Political Dysfunction, Population Explosion etc resulted into Higher inflation.
Table 1.1: Brent Crude Oil VS Global Inflation %
Source: Seven Star FX Knowledge Center, IDC and Data Stream
- Lesser Impact of Crude oil Price:
Moving Forward, Our Economic Prediction expect the lesser Base effect from the Existing lower oil prices about to Eradicate. In many Developed Economies like (US, UK, Germany and Australia) and other emerging Economies like China, Brazil & Mexico offset better economic growth rate & tightening Capacity will provide the Virtual impact to add the rebound inflation in the 2nd half of this year. While in Other Developed Markets with reference to some countries in Eurozone, The implicit inflation (i.e caused by internal Factor) remains on lower side as domestic Demand & supply surges the Spare Capacity that remains high.
On the Other Hand Emerging Markets, such as “BRICS” Countries i.e Brazil, Russia, India, China & South Africa (BRICS) where it seems the Spare Capacity Seems to be high but on the other hand this emerging economies are suffering from the Weaker Economic growth along with the high inflation has resulted into depreciation of their national currency. We also expected by the year end t he inflation rate will rise. Hence because of this currency seems to be depreciated against dollar still on-going crisis seems to be rampant. We thus forecast the weaker economic activities which has widened the gap of their activities output with such loop holes. It gives a clear indication that inflation rate might shoot up in the year 2016. While the Divergence in Inflation of emerging markets present across the Globe, shows a trend reversal by 2016.
Table 1.2: Inflation Forecast of various Economy
Forecast of Annual Inflation Rate:
- Central Bank Might end up in Rate Hikes:
With the Negative Substantial Divergence Rate in annual inflation that tends to boost & enhance the Central Bank policy, which might effects the country’s monetary policies playing a major role to curb its effects. The Current Signs shows the UK and US Economy Has recovered the Most in contradictory with their inflation rates that suggest that UK’s Central Bank: Bank of England & USA: Fed’ Reserves might raises the rates soon. While in the Emerging Markets like Brazil, China, Turkey, Korea and South Africa needs to tighten their economic policy inspite its shows the negative growth rate. While in Case of Other Developed economies like Japan, Canada, Australia & Switzerland , central Banks should go for the in Rising their Rates to Curb their inflationary Pressure.. While Due to the political instability prevailing in Indian and Russia, Economic growth that Seems to Be Stagnant will hurts them in a longer time Horizon Depicting the Higher inflation Growth Rate in the Mid-Year 2016.
Date: 18th August, 2015