Economists forecast inflation easing from multi-decade highs without sharp rise in unemployment
Central bankers are increasingly confident that inflation can be vanquished without driving up unemployment sharply, as economists forecast “immaculate disinflation”.Central bankers are increasingly confident that inflation can be vanquished without driving up unemployment sharply, as economists forecast “immaculate disinflation”.
But this inflationary cycle is seen as taking a different course. Michael Saunders, economist at Oxford Economics, noted that inflation was forecast to return to target with only a limited increase in unemployment in the US and euro zone.Reasons to be cheerful: 20 ways we’re better off now than we wereInflation eases to 3.4% in February but underlying price growth remains strong
However, unemployment is at a record low in the euro zone and is forecast to average 4 per cent this year in the US – not far from the 50-year low of 3.6 per cent in 2023, according to the latest monthly survey of economists from Consensus Economics. The UK’s joblessness rate is set to rise only to 4.4 per cent in 2024 and 4.5 per cent in 2025 from its near 52-year low of 3.9 per cent.
“The 2021-2023 inflation surge across advanced economies was different because it mainly reflected adverse supply shocks, rather than strong aggregate demand,” said Mr Saunders. The speed of the central banks’ response was also a factor in preventing higher inflation from becoming stickier, economists said.
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