7 Jan 2015
Euro inflation might decline to -0.5% yoy in March – Danske
FXStreet (Barcelona) - The Danske Bank Research Team expects euro inflation to decline further to -0.5% in March and remain negative until Q5 2015, noting low energy price inflation to be the prime catalyst.
Key Quotes
“Euro inflation declined below the deflation limit for the first time since the financial crisis in 2009. The negative inflation rate is a result of the sharp decline in the oil price since September 2014 but food price inflation and core inflation are also low from a historical perspective.“
“In December HICP inflation was -0.2% y/y, down from 0.3% y/y in November. Energy price inflation had a large negative impact on headline inflation, as it declined to -6.3% y/y from -2.6% y/y in November."
"We did expect a continued decline in energy price inflation, as the oil price continued lower in December, but the impact from the decline was a bit larger than expected.”
“Looking ahead, we expect euro inflation to decline further to -0.5% y/y in March and to remain negative until Q4 15. This mainly reflects low energy price inflation, as there is a lagged impact from the drop in the oil price and as we expect the oil price to remain low in Q1.”
“The negative inflation rate puts pressure on the ECB ahead of the meeting on 22 January and there is a rising probability that it will announce QE in government bonds at the January meeting."
"There is a need for more easing, even though the low inflation is the result of the oil price, reflecting that there is a risk that inflation expectations become de-anchored, which might lead to lower wage growth.”
Key Quotes
“Euro inflation declined below the deflation limit for the first time since the financial crisis in 2009. The negative inflation rate is a result of the sharp decline in the oil price since September 2014 but food price inflation and core inflation are also low from a historical perspective.“
“In December HICP inflation was -0.2% y/y, down from 0.3% y/y in November. Energy price inflation had a large negative impact on headline inflation, as it declined to -6.3% y/y from -2.6% y/y in November."
"We did expect a continued decline in energy price inflation, as the oil price continued lower in December, but the impact from the decline was a bit larger than expected.”
“Looking ahead, we expect euro inflation to decline further to -0.5% y/y in March and to remain negative until Q4 15. This mainly reflects low energy price inflation, as there is a lagged impact from the drop in the oil price and as we expect the oil price to remain low in Q1.”
“The negative inflation rate puts pressure on the ECB ahead of the meeting on 22 January and there is a rising probability that it will announce QE in government bonds at the January meeting."
"There is a need for more easing, even though the low inflation is the result of the oil price, reflecting that there is a risk that inflation expectations become de-anchored, which might lead to lower wage growth.”