Eurozone: Vigorous underlying inflation nowhere to be found – Nordea Markets


Jan von Gerich, Research Analyst at Nordea Markets, notes that the Eurozone’s final September inflation data confirmed the weak underlying price pressures with the core inflation (headline excluding energy, food, alcohol and tobacco) printing 0.9% y/y, unchanged after August saw a downward revision, while headline climbed from 2.0% y/y to 2.1%.

Key Quotes

“One needs to go the second decimal to find changes between the August and September contributions to annual core inflation: the contribution from services inflation fell marginally from 0.59 to 0.57 %-points.”

“The upward momentum in core inflation seems to have faded, which is also evident in our measure of the super-core inflation.”

“The latest numbers certainly highlight that there are still downside risks to both our and the ECB’s inflation forecasts. However, we continue to expect that core inflation will shift upwards in October when very weak observations from last year will disappear from annual numbers.”

“Weak underlying inflation developments support our view that the first rate hike will take place only in December 2019. However, these data will not make the ECB throw in the towel as far as a pick-up in inflation is concerned, and the net asset purchases are still set to conclude by the end of this year.”


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