ANCHOR OF ECONOMIC

AND FINANCIAL STABILITY

THE ECONOMY
GLOBAL INFLATION SUBDUED

Global inflation continued to be contained in 2014. Inflation in the G3 economies came in at 1.3%, unchanged from 2013. In the Eurozone, inflation slipped further, in part due to labour market reforms, which resulted in downward wage adjustments. Japan's headline inflation rate surged to 3.6% in Q2 2014 following the consumption tax hike, although it fell steadily thereafter. Underlying inflation was firm in the US, in line with the improvement in consumer and business sentiments. In Asia ex-Japan, inflation in 2014 moderated on account of lower food and fuel prices in China and India, while muted private consumption growth further dampened inflationary pressures in the NEA-3. ASEAN-4 inflation increased slightly, mainly due to upward price pressures resulting from fuel subsidy adjustments in Indonesia and Malaysia, as well as supply bottlenecks in the Philippines.

Global energy prices, which plunged in Q4 2014, remained low going into the first three months of 2015, leading to further disinflationary pressures in the G3 and Asia ex-Japan economies. Headline inflation in the US and the Eurozone turned mildly negative, while price pressures in Asia moderated.