Analysis Shows Tame Inflation Expectations, Room for Endless QE

The report noted:

Overall, inflation does not appear has high on the list of concerns for central banks across the globe, with few exception, like India and Russia. The global monetary policy stance is likely to remain unchanged, if not ease further for the next 6 to 12 months.

One exception listed was the United Kingdom, but that is based on the expectation that tuition fees and gas prices should increase inflation from the end of 2012.

The strength in prices seen in September is expected to be short-lived, according to the Credit Suisse report. Inflation was boosted that month by energy and/or food (or tax changes) rather than by a fundamental pick-up in core CPI components.

Credit Suisse also said:

In the coming few months, we do not expect any particular shocks that could derail the downward trend in inflation rates. Moderately falling oil prices, according to our commodity team’s view, and market pricing should exert downward pressures.

Emerging markets have some good news as well. The pass-through from higher food and agricultural prices this summer is seen as fading. Subdued economic growth also is expected to help to suppress demand-pull inflationary pressures, which should act to cap a rebound in food and nonfood prices.

If you do not trust the report from Credit Suisse, there is one other bit of data that supports this outlook at least for the time being. The Bank of Japan just announced more quantitative easing measures today with the purchase of assets. Economists at the BOJ even noted right up front that this was to combat deflation.

JON C. OGG