Monetary Policy & Inflation | UK | US
Disinflation Proceeding Slowly but Surely
- By Dominique Dwor-Frecaut
- 3 minutes read
Summary
• Disinflation is proceeding slowly, partly because exceptionally strong profits and limited competition mean large firms have little incentive to increase production and ease supply bottlenecks.
• Consumption surprised on the upside, but this entirely reflects a decrease in the savings rate, which is now back to pre-pandemic levels and may have little room to fall further.
• Meanwhile, pandemic-related transfers represented about 3% of disposable income in Q3 and are to fall to 0% in Q4. Consumption and therefore growth appear likely to slow further in Q4.
Market Implications
• Flatter curve
Summary
• Disinflation is proceeding slowly, partly because exceptionally strong profits and limited competition mean large firms have little incentive to increase production and ease supply bottlenecks.
• Consumption surprised on the upside, but this entirely reflects a decrease in the savings rate, which is now back to pre-pandemic levels and may have little room to fall further.
• Meanwhile, pandemic-related transfers represented about 3% of disposable income in Q3 and are to fall to 0% in Q4. Consumption and therefore growth appear likely to slow further in Q4.
Market Implications
• Flatter curve
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