April 14, 2014, 12:18 AM ET
Amid Warnings of Low Inflation, J.P. Morgan says Prices Set to Rise
By Tom Wright
The IMF again sounded the alarm bell at the weekend over low global inflation.
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- Low inflation in China and elsewhere could be a symptom of weak global demand.
- Agence France-Presse/Getty Images
But has the worst of anemic price rises already passed the world economy? That, at least, is the view of J.P. Morgan Chase & Co. economists.
In its weekly roundup of global economies, J. P. Morgan said it believed inflation has reached a low point after two-and-a-half years of falling price growth.
The bank noted that global consumer prices grew just 2% on year in February, their slowest pace since late 2009. Slowing growth in emerging markets, notably China, added to sluggish price growth in the U.S. and Europe.
But J.P. Morgan now expects inflation to pick up. There are a few factors at play.
Global growth is picking up, with the U.S. economy leading the way. This should “gradually turn the tide away from global disinflation,” the bank said.
Agricultural commodity prices are firming this year after a 23% slide from their June 2012 peak. Partly this is due to dry weather, which has hurt global cereal crop output.
Japan’s sales-tax increase on April 1 is also likely to add to the uptick in global prices in the short term, the bank said.
That doesn’t mean the specter of disinflation has disappeared. It remains a risk in Europe, where J.P. Morgan noted the central bank has been reluctant to use additional stimulus despite low inflation.
The Bank of Japan also is expected to ease further this year as consumer demand fades in the wake of the sales-tax hike. Asia’s poor exports performance, and concerns over Chinese growth, add to the worries.
Many economists would disagree that disinflation is no longer a worry. International Monetary Fund economists, in a recent piece, argued that low inflation is as bad as disinflation, as it deters consumers from spending and companies from investing.
Still, J.P. Morgan at least is calling the bottom for prices.
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