Eurozone: Core inflation to remain well below the ECB’s target – ABN AMRO

Aline Schuiling, senior economist at ABN AMRO, expects Eurozone’s core inflation to continue to remain close to 1% level during 2019.

Key Quotes

“We see underlying inflationary pressures stemming from the labour market remaining subdued, as we expect wage growth to slow down somewhat. However, productivity growth should decline as well, with employment growth reacting to the weakening in output growth with a delay. Therefore, the rise in unit labour costs should be more stable. Besides the lack of inflationary pressures stemming from the labour market, we think that the impact of import prices on the inflation rate, on balance, should also remain subdued.”

“The weakening of the global economy should reduce the inflation rate of global industrial goods, while an expected appreciation of the euro exchange rate will have a downward impact on import price inflation as well. All in all, core inflation should remain close the to 1%-level throughout 2019, which is about half the ECB’s target rate.”