Following the release of U.S. Consumer Price Index data for December last week, BNP Paribas has updated its inflation forecast to be 1.7% in 2015, down from its previous forecast of 1.9%. “Under our new forecast, the quarterly year-on-year rate of headline inflation falls below zero for three quarters (Q1-Q3 2015); previously we had expected negative y/y headline inflation rates for only two quarters,” they said Tuesday. After recording its biggest decline in six years, December CPI figures, which was released on Friday, dropped by 0.4%, but was still in line with expectations. “Steep drops in airfares (-5%), apparel (-1.2%) and used vehicle prices (-1.2%) accounted for about 50% of the downside surprise to core CPI,” they added. “We still expect an acceleration in core prices in H2 2015, as labor markets tighten and strength in final demand passes through into services prices,” they said.
