30 Apr 2015
ECB to lower core inflation expectations in June - DB
FXStreet (Guatemala) - The Danske Research Team noted that Euro area HICP inflation increased to 0.0% y/y in April from -0.1% y/y in March (consensus 0.0%, DBM +0.1%) and explained that a lower core inflation projection from the ECB is important.
Key Quotes:
"Core inflation was unchanged at 0.6% y/y, as service price inflation declined to a new historical low of 0.9% y/y in April from 1.0% y/y in March. The very low service price inflation reflects that there are still no signs of higher wage pressure despite progress in the labour market."
"The other part of core inflation (non-energy industrial goods) increased slightly to 0.1% y/y in April from 0.0% y/y in March. There have been some signs of higher price pressure on goods after private consumption improved. The weakening of the EUR also supports goods price inflation."
"The low core inflation increases the likelihood that the ECB will lower its core inflation forecast in June, when it will publish new projections. In March the ECB expected core inflation to average 0.8% in 2015 but with an average of 0.6% in the first four months and a continued downtrend in service price inflation, we expect it to lower its forecast. In 2016 the ECB expects core inflation to increase to an average of 1.3%, which we also believe is too high."
"A lower core inflation projection from the ECB is important, as it will continue its QE purchases until it sees a sustained adjustments in inflation and not just an increase that is driven by a rebound in energy price inflation."
Key Quotes:
"Core inflation was unchanged at 0.6% y/y, as service price inflation declined to a new historical low of 0.9% y/y in April from 1.0% y/y in March. The very low service price inflation reflects that there are still no signs of higher wage pressure despite progress in the labour market."
"The other part of core inflation (non-energy industrial goods) increased slightly to 0.1% y/y in April from 0.0% y/y in March. There have been some signs of higher price pressure on goods after private consumption improved. The weakening of the EUR also supports goods price inflation."
"The low core inflation increases the likelihood that the ECB will lower its core inflation forecast in June, when it will publish new projections. In March the ECB expected core inflation to average 0.8% in 2015 but with an average of 0.6% in the first four months and a continued downtrend in service price inflation, we expect it to lower its forecast. In 2016 the ECB expects core inflation to increase to an average of 1.3%, which we also believe is too high."
"A lower core inflation projection from the ECB is important, as it will continue its QE purchases until it sees a sustained adjustments in inflation and not just an increase that is driven by a rebound in energy price inflation."