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Anders Svendsen, analyst at Nordea Markets, points out that the Euro area core inflation  surprised the market to the upside with 1.2% in April (consensus: 1.0%) in line with their expectations, driven by the late timing of Easter in 2019 compared to last year.

Key Quotes

“The most seasonal constituents of core inflation, such as package holidays, picked up substantially during the days before and around Easter.”

“We do not see much change to the  underlying trend  in core inflation.  Services price inflation  picked up temporarily, especially driven by the German subcomponent, which in turn was driven by the highly volatile package holiday prices (April +11.2% y/y).”

“The risks to the downside persist upholding the pressure on the ECB to provide further easing once inflation falls back behind staff projections again in May and going forward.”

“Headline HICP inflation  came in at 1.7% as we expected (consensus: 1.6%), driven by an uptick in  energy price inflation  to 5.4% (March: 5.3%) which was driven by increased oil prices and a strong dollar.”

“Markets currently anticipate a reverse contribution from energy prices throughout the second half of 2019, which will naturally be a drag to headline inflation.”