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Bert Colijn, senior economist at ING, notes that Eurozone’s inflation fell from 1 to 0.9% in September, while core inflation moved up from 0.9 to 1%.

Key Quotes

“The small movements in inflation in September are indicative of the current pricing environment, which is lacklustre. Sure, energy price base effects are likely to boost inflation over the coming months, but that will not result in a sustainable move towards the ECB’s 2% target.”

“The underlying picture for inflation continues to be weak as drivers of inflation have recently started to soften. This is partly driven by weaker producer price developments, but also related to significant declines in selling price expectations of businesses over recent months. Even though services inflation did tick up to 1.5% in September, it is unlikely that we’ll see a significant jump in core inflation in the months ahead.”

“For the ECB, today’s figures will not be a surprise, but the underlying picture remains one of concern nonetheless. The smorgasbord of stimulus that ECB President Mario Draghi announced a few weeks ago will need to have quite some impact to see core inflation move out of the 1% range in the course of 2020. If it does not, the ECB’s own expectations for core inflation may once again need to be lowered.”