These are the personal views of Thomas Lam, group chief economist at OSK Group/DMG & Partners:
The various measures of core inflation, specifically the CPI and PCE that exclude food and energy, have continued to drift lower in recent quarters, from around 2.5% in 2008 to slightly under 1.5% in early 2010, measured as a percentage change from a year ago.
While our prevailing forecast assumes the ongoing disinflation will continue in the remaining quarters of 2010, we expect core PCE inflation to settle around the 1% threshold at the end of 2010. But some economists in the Phillips Curve camp, harnessing the short-term relationship between unemployment and inflation, anticipate more significant disinflation.
