From a historical perspective, wage increases have been muted and core PCE inflation has overall remained below the central bank’s 2 % target. Looking forward, the inflation outlook is more upbeat, though: wages have accelerated a little of late and temporary factors that have held down core inflation are disappearing.
Consequently, US monetary policy makers project core inflation to pick up, running slightly above 2 % in 2019 and 2020. This suggests that the growth-inflation disconnect in the US is temporary. For the euro area, available data call for more caution.