Too early to tell whether prices and wages will rise

A belief that inflation will stay subdued despite the pick-up in global growth, is driving market expectations that interest rates will remain very low for the rest of this decade.

This is a key call for financial markets as low interest rates are underpinning elevated stock markets, low bond yields and tight credit spreads.

Past history would suggest that inflation should rise as GDP growth strengthens, with, most notably, a pick-up in wage inflation as unemployment falls to low levels. This has not happened in this cycle. Core inflation rates remain below 2% in most countries.