Global inflation fell to low levels in 2015, dragged down by declining energy prices and sluggish growth. Headline inflation in the G3 economies dropped sharply to 0.2%, from 1.3% in 2014. In the US and Eurozone, prices were unchanged in 2015, mainly due to the disinflationary effects of falling energy prices. Nonetheless, core inflation stayed firm at 1.8% in the US, reflecting diminishing slack in the labour market. Japan’s CPI inflation rate was 0.8%, although this was largely attributable to the residual effects of the consumption tax hike in the previous year. In Asia ex-Japan, inflation fell in 2015, as food and fuel costs eased in China and India. Inflation in the NEA-3 was similarly weighed down by declining commodity prices, which also capped ASEAN-4 price gains. In Thailand, inflation turned negative, as underlying price pressures weakened in line with a protracted period of below-trend growth.

In the first quarter of 2016, global headline inflation, while still low, edged up slightly to 1.3% y-o-y from 1.0% in Q4 2015. Price developments were uneven among the G3 economies, with inflation picking up in the US as the effects of low energy prices dissipated, but moderating in the Eurozone and Japan due to relatively subdued growth. Meanwhile, inflation held steady in Asia ex-Japan at 3.3% y-o-y, driven mainly by food price increases.