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Feb 14, 2024
By: Bhumi Shrivastava
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Stripping out volatile components like food and energy, core inflation provides a more stable measure, indicating a better predictor of future inflation.
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Historically, wage growth and inflation are closely linked, with mid-2022 wage growth suggesting around 4% inflation.
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While prices indicate around 3% inflation, wage growth aligns with 3.5-4%, suggesting underlying inflation in the 3-3.5% range.
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Declining energy prices have contributed significantly to the one-percentage-point decline in underlying inflation.
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Despite a steady unemployment rate, the number of job openings has decreased, leading to slower wage and price growth.
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Fiscal support reduction and monetary policy tightening have constrained aggregate demand, contributing to the decline in underlying inflation.
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While current disinflation trends are positive, uncertainties remain, urging readiness for further actions if inflation persists above the acceptable range.
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