Eurozone: Muted price pressures – Nordea

Inge Klaver, analyst at Nordea Markets, points out that Eurozone’s headline HICP inflation continued to lose momentum and came out at 0.9% y/y in September, below expectations.

Key Quotes

“Headline inflation continues the downward course of the last few months. The y/y reading came in at 0.9%. Headline is trending down on the back of lower energy prices, while food prices contributed positively.”

“As expected, Euro-area core inflation bounced back up to 1.0% y/y in September. This was mainly driven by an increase in service price inflation, which partly stems from an increase in package holiday prices as suggested by preliminary data from Germany released yesterday.”

“We continue to expect underlying inflationary pressures to build, but very gradually.”

“The September inflation is unlikely to be a key variable when the ECB makes its next moves. The economic outlook is requiring more attention than short-term movements in the inflation rate right now. Current weak growth numbers will weaken price pressures in the future and are posing downside risks to the already-well-below-target ECB staff inflation projections.”

“For now, markets are awaiting Lagarde’s first speech as an ECB president. We still expect another easing package in December.”