Search for inflation proves elusive for central banks

The global economy looks to be on a constructive trajectory, rebounding in 2017 after bottoming in 2016. 
The growth is broad-based and well synchronised between developed and emerging markets. Although central banks have begun considering their exit plans from ultra-easy monetary policy, inflation has yet to emerge and is keeping central banks in check. A stronger and more persistent trend of rising inflation will be needed for a decisive leg up in rates.
Inflation has fallen globally with the pace of price rises "below target" in almost all of the 26 inflation-targeting economies. Barring the UK, where a weaker currency has translated into inflation running at above 2.5 per cent, inflation in G10 countries has remained below 2 per cent for most of this decade. This is despite solid GDP growth and improving employment levels. In the US, the market under most scrutiny, headline inflation fell to 1.6 per cent in June from 1.9 per cent a month earlier and even higher at the start of 2017. In the euro zone and Japan, the trend is broadly similar.
The inflation picture in the key emerging markets is slightly different. In countries such as Brazil and Russia, inflation has been declining as prolonged recession in these economies comes to an end. Central banks in both countries are likely to continue their monetary easing cycles. China is still growing at a fairly robust pace with core inflation fluctuating between 1 per cent and 2 per cent over the last two years. Significant overcapacity in industry suggests, however, that a sustained uplift in prices will be a slow process. In contrast, inflation has moved higher in economies that recently experienced currency weakness, like Turkey and Mexico, but this will likely be temporary and fade once higher import prices have filtered through to the economy and the currencies stabilise.
Getting inflation right is critical for central bank policymakers. Too high and excessive price levels limit consumption, but when inflation is too low companies will be hesitant to invest and consumers may delay purchases, also threatening consumption on the downside. Textbook wisdom links inflation to changes in employment levels, financial system liquidity and supply and demand for goods. However, none of these dynamics provide a good answer to explain the current lack of inflation in the developed world.
Unemployment levels in the US and UK are currently at two and four-decade lows respectively, but wage growth has consistently remained at or below 2.5 per cent. Part of the reason is the influx of cheap labour, either by importing labour onshore or exporting jobs offshore (and hence lower cost production) from markets such as China and India that keeps employees' bargaining power minimal despite tight labour conditions. Moreover, over the past decade there have been profound labour-market reforms. Widespread unionisation of the private sector has largely dissipated, along with collective wage bargaining that many blamed for helping to fuel wage and price spirals in the earlier decades. They have been replaced with minimum-wage legislation and an increasingly casual labour force – the "gig economy" – that is much more flexible to changes in the wider economy.
Nor is a shortage of liquidity to blame for current low inflation levels. The US monetary base rose at an annual rate of 9 per cent from 1985-95, then slowing to 6 per cent in 1995 to 2005. Consumer price inflation (CPI) during this time was 3.5 per cent between 1985 to 1995 and then slowed to 2.5 per cent in the decade to 2005. From 2005 to 2015 the monetary base soared at an annual rate of 17.8 per cent (from US$1 trillion in 2007 to $4tn in 2015), but CPI increased at an annual rate of just 1.9 per cent.
That leaves supply and demand dynamics as the culprit behind low inflation figures. We believe some key reasons for low current inflation may be related to excess capacity in labour where the participation rate in the US has come down considerably over the past two decades, from close to 70 per cent in the 1990s to less than 63 per cent as of June 2017. The major downturn in commodity prices in the past few years — most evident in oil markets but also in metal and agricultural prices — has also been a result of large increases in supply outpacing demand. At an even higher level, GDP growth globally has been slowing, from double-digit to single-digit growth in markets like China and from mid-single digit to low single digit in the developed world.
There have also been dynamics specific to the most recent financial crisis that have sapped away momentum from price growth. The US Federal Reserve started to offer interest on reserve deposits which meant commercial banks could use the cash to invest in reserve deposits instead of risk lending to corporates. At the same time, regulation became more stringent, leading to banks becoming more cautious in lending.
If the true cause of low inflation expectations is weak global growth; a glut of workers from emerging markets and excess capacity driving down corporate pricing power in many industries then central bankers could be facing a serious challenge to their credibility in the months ahead, as both realised inflation and inflation expectations could take even longer to return to target.
Anita Yadav is the head of fixed income research at Emirates NBD

Past winners of the Abu Dhabi Grand Prix

2016 Lewis Hamilton (Mercedes-GP)

2015 Nico Rosberg (Mercedes-GP)

2014 Lewis Hamilton (Mercedes-GP)

2013 Sebastian Vettel (Red Bull Racing)

2012 Kimi Raikkonen (Lotus)

2011 Lewis Hamilton (McLaren)

2010 Sebastian Vettel (Red Bull Racing)

2009 Sebastian Vettel (Red Bull Racing)



Director: Sudha Kongara Prasad

Starring: Akshay Kumar, Radhika Madan, Paresh Rawal

Rating: 2/5


Company name: Revibe
Started: 2022
Founders: Hamza Iraqui and Abdessamad Ben Zakour
Based: UAE
Industry: Refurbished electronics
Funds raised so far: $10m
Investors: Flat6Labs, Resonance and various others

Tori Amos
Native Invader


Company name: Klipit

Started: 2022

Founders: Venkat Reddy, Mohammed Al Bulooki, Bilal Merchant, Asif Ahmed, Ovais Merchant

Based: Dubai, UAE

Industry: Digital receipts, finance, blockchain

Funding: $4 million

Investors: Privately/self-funded


Company name: Almouneer
Started: 2017
Founders: Dr Noha Khater and Rania Kadry
Based: Egypt
Number of staff: 120
Investment: Bootstrapped, with support from Insead and Egyptian government, seed round of
$3.6 million led by Global Ventures

One in nine do not have enough to eat

Created in 1961, the World Food Programme is pledged to fight hunger worldwide as well as providing emergency food assistance in a crisis.

One of the organisation’s goals is the Zero Hunger Pledge, adopted by the international community in 2015 as one of the 17 Sustainable Goals for Sustainable Development, to end world hunger by 2030.

The WFP, a branch of the United Nations, is funded by voluntary donations from governments, businesses and private donations.

Almost two thirds of its operations currently take place in conflict zones, where it is calculated that people are more than three times likely to suffer from malnutrition than in peaceful countries.

It is currently estimated that one in nine people globally do not have enough to eat.

On any one day, the WFP estimates that it has 5,000 lorries, 20 ships and 70 aircraft on the move.

Outside emergencies, the WFP provides school meals to up to 25 million children in 63 countries, while working with communities to improve nutrition. Where possible, it buys supplies from developing countries to cut down transport cost and boost local economies.


UAE currency: the story behind the money in your pockets

Director: Khalid Fahad

Starring: Shaima Al Tayeb, Wafa Muhamad, Hamss Bandar

Rating: 3/5

Zakat definitions

Zakat: an Arabic word meaning ‘to cleanse’ or ‘purification’.

Nisab: the minimum amount that a Muslim must have before being obliged to pay zakat. Traditionally, the nisab threshold was 87.48 grams of gold, or 612.36 grams of silver. The monetary value of the nisab therefore varies by current prices and currencies.

Zakat Al Mal: the ‘cleansing’ of wealth, as one of the five pillars of Islam; a spiritual duty for all Muslims meeting the ‘nisab’ wealth criteria in a lunar year, to pay 2.5 per cent of their wealth in alms to the deserving and needy.

Zakat Al Fitr: a donation to charity given during Ramadan, before Eid Al Fitr, in the form of food. Every adult Muslim who possesses food in excess of the needs of themselves and their family must pay two qadahs (an old measure just over 2 kilograms) of flour, wheat, barley or rice from each person in a household, as a minimum.

How to turn your property into a holiday home
  1. Ensure decoration and styling – and portal photography – quality is high to achieve maximum rates.
  2. Research equivalent Airbnb homes in your location to ensure competitiveness.
  3. Post on all relevant platforms to reach the widest audience; whether you let personally or via an agency know your potential guest profile – aiming for the wrong demographic may leave your property empty.
  4. Factor in costs when working out if holiday letting is beneficial. The annual DCTM fee runs from Dh370 for a one-bedroom flat to Dh1,200. Tourism tax is Dh10-15 per bedroom, per night.
  5. Check your management company has a physical office, a valid DTCM licence and is licencing your property and paying tourism taxes. For transparency, regularly view your booking calendar.

Louis Tomlinson

3 out of 5 stars

(Syco Music/Arista Records)

The specs

Engine: Dual synchronous electric motors
Power: 646hp
Torque: 830Nm
Transmission: Two-speed auto (rear axle); single-speed auto (front)
Price: From Dh552,311; Dh660,408 (as tested)
On sale: now

The specs: 2018 Nissan 370Z Nismo

The specs: 2018 Nissan 370Z Nismo
Price, base / as tested: Dh182,178
Engine: 3.7-litre V6
Power: 350hp @ 7,400rpm
Torque: 374Nm @ 5,200rpm
Transmission: Seven-speed automatic
​​​​​​​Fuel consumption, combined: 10.5L / 100km


Edinburgh: November 4 (unchanged)

Bahrain: November 15 (from September 15); second daily service from January 1

Kuwait: November 15 (from September 16)

Mumbai: January 1 (from October 27)

Ahmedabad: January 1 (from October 27)

Colombo: January 2 (from January 1)

Muscat: March 1 (from December 1)

Lyon: March 1 (from December 1)

Bologna: March 1 (from December 1)

Source: Emirates

Tips for used car buyers
  • Choose cars with GCC specifications
  • Get a service history for cars less than five years old
  • Don’t go cheap on the inspection
  • Check for oil leaks
  • Do a Google search on the standard problems for your car model
  • Do your due diligence. Get a transfer of ownership done at an official RTA centre
  • Check the vehicle’s condition. You don’t want to buy a car that’s a good deal but ends up costing you Dh10,000 in repairs every month
  • Validate warranty and service contracts with the relevant agency and and make sure they are valid when ownership is transferred
  • If you are planning to sell the car soon, buy one with a good resale value. The two most popular cars in the UAE are black or white in colour and other colours are harder to sell

Tarek Kabrit, chief executive of Seez, and Imad Hammad, chief executive and co-founder of

The years Ramadan fell in May





The Letter Writer

Director: Layla Kaylif

Stars: Eslam Al Kawarit, Rosy McEwen, Muhammad Amir Nawaz

Rating: 2/5

Aston martin DBX specs

Engine: 4.0-litre twin-turbo V8

Transmission: nine-speed automatic

Power: 542bhp

Torque: 700Nm

Top speed: 291kph

Price: Dh848,000

On sale: Q2, 2020


All kick-off times UAE (+4 GMT)
Brackets denote aggregate score

Roma (1) v Shakhtar Donetsk (2), 11.45pm
Manchester United (0) v Sevilla (0), 11.45pm

Besiktas (0) v Bayern Munich (5), 9pm
Barcelona (1) v Chelsea (1), 11.45pm

Most Read
Top Videos

Energy This Week

Expert analysis on oil & gas renewables and clean energy

      By signing up, I agree to The National's privacy policy
      Energy This Week