LONDON: Stock markets have spent the year rising on bets of a resurgence in inflation, while central bankers trying to manage the global economy have spent the same time repeatedly reassuring everyone it’s just around the corner. Policymakers gathering at an annual monetary retreat in Jackson Hole, Wyoming in the coming week no doubt will be collectively pondering why the textbook rule that says low unemployment leads to labour shortages, then higher wages, and then in turn higher inflation, isn’t working. Yet the global economy is growing strongly. Apart from the risk of a stock market correction, there is no evidence of disinflationary threats like those that emanated from the financial crisis that started to smoulder a decade ago. The latest Reuters Polls of more than 500 economists covering more than 45 economies around the world showed almost no move in inflation expectations since the start of the year. In the United States, where the Federal Reserve is raising interest rates, inflation pressures are in an extended lull, which has led to contorted arguments trying to explain it away. Omair Sharif, senior U.S. economist at Societe Generale, in a recent note titled “All my exes”, criticises a recent tendency to search for suitably favourable core measures of inflation – stripped of, or “ex-”, whatever components are holding it down. “In short, while the core CPI undoubtedly looks better when you strip out sizable price declines, all these ‘ex’ measures still show a softening in the core rate that began in January,” he wrote. “Moreover, as we have noted before, the transitory excuse is long past its sell-by date.” Analysts who follow the European Central Bank have been equally disappointed that after spending 2 trillion or so euros buying mostly government bonds it’s only running 1.3 percent euro zone inflation, still well below the 2.0 percent ceiling. Some measures of core inflation are even lower. Frederik Ducrozet, economist at Pictet, has taken heart from a recent trend move higher in the “super core” euro zone inflation rate, which excludes the cost of package holidays. The trouble is, the euro is on a tear higher. That is a reflection of vastly improved economic performance by many euro zone economies this year, but as the common currency climbs, it acts as a drag on exports and tamps down imported inflation. Published in Daily Times, August 20th 2017.