ANCHOR OF ECONOMIC

AND FINANCIAL STABILITY

THE ECONOMY
HEADLINE INFLATION DECLINED IN THE G3

Global inflation remained benign in 2013. In the G3, headline inflation fell to 1.3% in 2013 from 1.9% in 2012. The US and the Euro zone faced mild disinflationary pressures stemming from lower energy costs and slack in capacity utilisation. However, Japan saw a significant rise in inflation in H2 2013, as higher prices of imported goods were passed through to consumer prices. Meanwhile, inflation in Asia ex-Japan was unchanged at 3.9% in 2013. While supply-side constraints in India kept prices elevated and the rationalisation of fuel subsidies in some ASEAN-4 countries put upward pressure on inflation rates in the second half of 2013, these were offset by an easing of price pressures in the NIEs due to subdued commodity prices.

In the first three months of 2014, global inflation remained subdued. While headline inflation increased slightly in the US, a stronger Euro held down import costs and contributed to much smaller price increases in the Euro zone. Price pressures in Asia ex-Japan eased somewhat, on account of lower food prices in India and China.