Danske Bank analysts suggest that Eurozone’s inflation print came in below their estimate and market consensus at only 0.8% (1.3% in April), while the headline inflation was 1.2%.
Key Quotes
“We expect core inflation to rebound to 1.0% in June.”
“We do not throw in the towel on our relatively upbeat inflation projections for this year, as we continue to find reasons to expect core inflation to trend gradually upwards towards year-end, albeit we acknowledge downside risks to our inflation forecast.”
“We expect the ECB to reflect on the new information but believe it is unlikely to change its monetary policy stance ahead of the meeting on Thursday. While previously inflation pricing and first rate hike pricing have been correlated, the market discussion focuses on an ECB cut.”
“In our opinion, President Mario Draghi and the ECB will have to walk a tightrope at the upcoming meeting on Thursday. The May inflation print is on the low side compared with expectations despite the decline being attributed to base effects. Therefore, the ECB may want to see a ‘clearer’ underlying inflation print in late June before changing its stance.”
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