BNP Paribas say that they now expect headline CPI inflation to be negative on an annual average basis in 2015. In a report released Thursday, analysts say they updated their inflation expectations for the year because of weaker crude oil and gasoline prices. However, weaker energy prices might not filter down to core prices, which strip out volatile energy and food prices. “We still expect the energy price shock to have only transitory effects and limited pass through into core, though we will be re-evaluating that assumption over time,” they say. “Our forecast assumes household and business inflation expectations remain reasonably well-anchored.” Although the French bank expects weaker headline inflation, it is important to note that the Federal Reserve only looks at core inflation when determining monetary policy.
