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The return of inflation: Now expecting 2% for 2021

February 25, 2021
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The Jan print of 1% yoy surprised massively to the upside, in part due to one-offs. But the strong rise in core goods prices begs the question whether the Jan readings could herald stronger underlying inflation dynamics. There are still strong arguments for a continuation of structurally low inflation dynamics. However, we see risk that price dynamics could strengthen more strongly through impaired supply conditions. Overall, we now project the inflation rate to average 2.0% in 2021. Towards the end of 2021 the headline rate could spike to as much as 3% before easing to 1 ½% in Q1 2022. [more]

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