Search ForexCrunch

The most common question received by Neil Shearing from Capital Economics was whether the Coronavirus shock would be inflationary or disinflationary. The answer depends in part on the timeframe under consideration.

Key quotes

“Over the next month or so, while economies are in lockdown, for many parts of the CPI basket the shock will be neither inflationary or deflationary.” 

“If oil levels out at around $25pb, we estimate that the drop in prices will knock around 1.5%-pts off headline inflation in advanced economies by the end of Q2.”

“Over 2020 as a whole, we’ve pushed down our forecasts for headline inflation in advanced economies from 1.6% to 0.3%, and core inflation down from 1.6% to 1.2%.”