17 Jul 2014
Eurozone CPI could stay below ECB's target until at least early 2016 - ING
FXStreet (Łódź) - Martin van Vliet from ING comments on the recently released low Eurozone CPI numbers for June, saying that the data maintains pressure on the ECB to keep the door open to further policy easing.
Key quotes
"According to a final estimate by Eurostat, headline inflation in the 18-country region held steady at 0.5% in June at its lowest level in more than four and a half years."
"The rise in core inflation, however, is unlikely to mark the start of an upward trend. Indeed, with the large amount of spare capacity in the Eurozone economy only slowly being eroded, core inflation, if anything, may fall somewhat further in the near term."
"Looking ahead, our base case scenario is for headline inflation to edge lower in the next few months on the back of the recent drop in oil prices, before slowly rising from October onwards as energy and food price inflation turn positive again."
"Even so, inflation is likely to remain well below the ECB’s target until at least early 2016."
"The sustained low inflation environment makes it more difficult for peripheral economies to restore competitiveness and to reduce their debt burden."
"Moreover, it provides little safety margin against further adverse economic shocks. The Eurozone may still be just one shock away from deflation."
Key quotes
"According to a final estimate by Eurostat, headline inflation in the 18-country region held steady at 0.5% in June at its lowest level in more than four and a half years."
"The rise in core inflation, however, is unlikely to mark the start of an upward trend. Indeed, with the large amount of spare capacity in the Eurozone economy only slowly being eroded, core inflation, if anything, may fall somewhat further in the near term."
"Looking ahead, our base case scenario is for headline inflation to edge lower in the next few months on the back of the recent drop in oil prices, before slowly rising from October onwards as energy and food price inflation turn positive again."
"Even so, inflation is likely to remain well below the ECB’s target until at least early 2016."
"The sustained low inflation environment makes it more difficult for peripheral economies to restore competitiveness and to reduce their debt burden."
"Moreover, it provides little safety margin against further adverse economic shocks. The Eurozone may still be just one shock away from deflation."