Core inflation could be higher than anticipated in the immediate years ahead
Sariola, Mikko; Pönkä, Harri (05.07.2023)
JulkaisusarjaBank of Finland. Bulletin
JulkaisijaBank of Finland
Julkaisun pysyvä osoite onhttps://urn.fi/URN:NBN:fi-fe2023070690314
The alternative scenario of the Bank of Finland’s forecast for the Finnish economy examines the forecasting risks involved in its inflation forecasts. Inflation may prove to be higher than in the Bank’s June 2023 baseline forecast if the rate of underlying, or core, inflation (measuring price changes in consumer goods and services) begins to rise, after a lag, as a result of both demand and wage increases being higher than anticipated. Stronger aggregate demand would also keep the labour market tighter than in the baseline forecast, and the unemployment rate would decrease to a greater extent. This would cause wages to rise further in the coming years, which would maintain upward pressure on prices.
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