4th June 2014
Schroders Quickview: Low eurozone inflation increases pressure on ECB to act
The ‘flash’ estimate is lower than the consensus estimates and highlights the degree of deflationary pressures in the eurozone economy.
The main drivers of the recent low figures have been low food and energy price inflation. The latest estimate shows energy price inflation flat compared to a year ago, while food, alcohol & tobacco inflation is up just 0.1%. Excluding these categories, core inflation is running higher at 0.7%, but even this represents a slowdown compared to April (1%).
Taking the weaker-than-expected GDP growth figures for the first quarter along with the lower-than-expected inflation numbers, the European Central Bank is now under pressure to deliver significant policy loosening. The market expects at least a cut in the main policy interest rate, along with a cut to the deposit rate, but will there be anything further to support bank lending and demand across the economy?
The main drivers of the recent low figures have been low food and energy price inflation. The latest estimate shows energy price inflation flat compared to a year ago, while food, alcohol & tobacco inflation is up just 0.1%. Excluding these categories, core inflation is running higher at 0.7%, but even this represents a slowdown compared to April (1%).
Taking the weaker-than-expected GDP growth figures for the first quarter along with the lower-than-expected inflation numbers, the European Central Bank is now under pressure to deliver significant policy loosening. The market expects at least a cut in the main policy interest rate, along with a cut to the deposit rate, but will there be anything further to support bank lending and demand across the economy?
Azad Zangana, European Economist
You need to be logged in to comment on this article