Bert Colijn, Senior Economist at ING, suggests that with the Eurozone’s energy price index increasing 8% year on year, the increase in headline inflation was once again mainly due to higher oil prices.
Key Quotes
“This masks the continued sluggish performance of core inflation, which dropped from 1.1% to 1% in June. A few one-off factors have impacted the core reading over the past months, making especially services inflation more volatile than it usually is.”
“The increase to 0.4% in non-energy goods inflation must have been a silver lining to a weak inflation release for hawks.”
“The higher oil price will keep the headline inflation rate higher over the summer months, after which it is likely to converge towards the lower core inflation rate. Core inflation is set to improve slowly over the second half of the year.”
“While inflation is now on the mark, the drop in core inflation must leave the ECB slightly unsettled with the exit of QE in mind.”
“Don’t expect anything exciting at the July meeting because of this though, the ECB macro projections for this year’s core inflation are not that ambitious at 1.1% on average.”
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