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Euro-area inflation came in at 0.1% y/y in May, down from 0.3% last month, while core inflation stood unchanged. The outlook is more uncertain further out, but analysts at Nordea see mostly downside risks to inflation in the coming years.

See: Eurozone Preliminary CPI misses estimates with 0.1% YoY in May, EUR/USD keeps highs

Key quotes

“Headline inflation in the Euro area continued down to 0.1% y/y in May according to the flash estimate. Energy prices continue to pull heavily on the headline, as it dropped 12% y/y, while unprocessed food prices were 6.5% higher. Core inflation stood unchanged at 0.9% y/y, surprisingly.” 

“Headline inflation in Germany as measured by the preliminary HICP was 0.5% y/y in May, in line with expectations and down from last month’s 0.8%. Consumer prices in France came in with HICP at 0.2% y/y. In Spain, inflation dipped even further below zero than last month, reporting HICP at -0.9% y/y. Italian prices also dropped compared to last year, with preliminary inflation at -0.1% y/y.”

“Our forecast is for very low headline inflation this year and next year, at 0.0% and 0.5% y/y respectively. For Italy and Spain, we see a negative outcome this year.”