Advisor Flipbooks

2024 SEI ® Data as of 12/31/2023 unless otherwise indicated. 7 Exhibit 9: Going down the inflation mountain Source: FactSet, SEI. Do the declines mean that central banks can confidently declare, "Mission accomplished"? In our opinion, the answer is a firm "no." This is admittedly a minority view in the aftermath of the U.S. Federal Reserve's (Fed) latest policy meeting in December, but we note that the bulk of the improvement has come in volatile food and energy prices. Exhibit 10 highlights the core inflation measures for the U.S., the U.K., Canada, the eurozone and Japan (The core consumer price index (CPI) data are published by the individual governments, and do not use the harmonized CPI methodology). Canada has recorded the largest improvement from the peak, with core inflation rising just 2.9% over the past year as of November 2023. Japan also saw core inflation rise 2.8%, but price gains there are still accelerating a bit (as opposed to the other countries depicted in the exhibit). Exhibit 10: Getting to the core of the problem Source: FactSet, SEI. The annual inflation rate in the U.S. (+4.0%) and the eurozone (+3.6%) tracked each other in 2023, but we think core inflation in Europe is more likely than the U.S. to get closer to the respective central banks' 2% target by the end of 2024, due to a relatively weaker regional economy, while the U.S. sees a stabilization of inflation closer to the 3% mark. The U.K., on the other hand, has had a much more difficult time getting its inflation rate lower. As of November 2023, the 12-month rate of change in consumer price index (CPI) core inflation was a still-worrisome 5.1%. Although U.K. inflation probably will decelerate further in the months ahead, the sharp increase in compensation rates noted in Exhibit 7 will likely impede that improvement and keep core inflation well above the Bank of England's (BOE) 2% target. -5 0 5 10 15 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Percent change over 12-month span Harmonized CPI U.K. France Eurozone Germany U.S. -4 -2 0 2 4 6 8 2013 2015 2017 2019 2021 2023 Percent change over 12-month span Core consumer prices U.K. U.S. Eurozone Canada Japan

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