1 May 2015
ECB could revise lower its inflation forecasts – Danske Bank
FXStreet (Edinburgh) - In light of the recent inflation figures in the euro area, analysts at Danske Bank believes the ECB’s forecasts remain too optimistic, and could be revised lower in the June meeting.
Key Quotes
“Euro area HICP inflation increased to 0.0% y/y in April from -0.1% y/y in March”.
“Core inflation was unchanged at 0.6% y/y, as service price inflation declined to a new historical low of 0.9% y/y in April from 1.0% y/y in March. The very low service price inflation reflects that there are still no signs of higher wage pressure despite progress in the labour market”.
“The low core inflation increases the likelihood that the ECB will lower its core inflation forecast in June, when it will publish new projections. In March the ECB expected core inflation to average 0.8% in 2015 but with an average of 0.6% in the first four months and a continued downtrend in service price inflation, we expect it to lower its forecast. In 2016 the ECB expects core inflation to increase to an average of 1.3%, which we also believe is too high”.
“A lower core inflation projection from the ECB is important, as it will continue its QE purchases until it sees a sustained adjustments in inflation and not just an increase that is driven by a rebound in energy price inflation”.
Key Quotes
“Euro area HICP inflation increased to 0.0% y/y in April from -0.1% y/y in March”.
“Core inflation was unchanged at 0.6% y/y, as service price inflation declined to a new historical low of 0.9% y/y in April from 1.0% y/y in March. The very low service price inflation reflects that there are still no signs of higher wage pressure despite progress in the labour market”.
“The low core inflation increases the likelihood that the ECB will lower its core inflation forecast in June, when it will publish new projections. In March the ECB expected core inflation to average 0.8% in 2015 but with an average of 0.6% in the first four months and a continued downtrend in service price inflation, we expect it to lower its forecast. In 2016 the ECB expects core inflation to increase to an average of 1.3%, which we also believe is too high”.
“A lower core inflation projection from the ECB is important, as it will continue its QE purchases until it sees a sustained adjustments in inflation and not just an increase that is driven by a rebound in energy price inflation”.