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EMU CommentAnother disinflationary month

  1. Another disinflationary month
  2. Big four euro countries drive down inflation
  3. Ongoing disinflation strengthens ECB doves
Another disinflationary month
The September flash annual consumer price index was 0.9% y-o-y and just below expectations, compared to 1% the previous month. Meanwhile, core inflation was 1% and in line with expectations, compared to 0.9% the month before. In particular, headline inflation continues to be held down by lower contributions from energy, as services remain the singular inflationary component in the core consumer price basket.
Big four euro countries drive down inflation
Recent releases from the big four euro countries indicate broad disinflation within the core euro area. Whereas both Spain and Italy continue to experience below-composite year-on-year rates of inflation (0.2% and 0.3% respectively in September) the significantly lower-than-expected September number for Germany (0.9% for HICP) is further evidence of the euro area's struggles.
Ongoing disinflation strengthens ECB doves
In our view, ongoing disinflationary pressures are likely to boost the the case for the doves in the ECB, potentially leaving them more room to tilt toward more expansionary policy, particularly in the design of the restarted QE programme. As we've noted in our previous commentary, without a significant alteration of the package to raise limits and shift focus toward riskier assets, it will be difficult to achieve real effects on either growth or inflation.

Inflation remains muted in September

 Big four euro countries drive down inflation


Source: Macrobond



Disclaimer

 Erik Meyersson

Erik Meyersson

Senior Economist

Eurozone

erme03@handelsbanken.se

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