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CPI data out so far in three German states and the drop in Belgian inflation to -1.1% y-o-y (vs. the previous -0.4%) are consistent with our forecast that eurozone inflation in June will ease 0.1pp to -0.1% y-o-y. We therefore stick to our call, and see risks as broadly balanced. The flash estimate is due on Tuesday.
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For June, in the eurozone we have penciled in a strong increase in the price of oil products, but a favorable base effect implies that energy prices probably were little changed in y-o-y terms. As we expect stability also in core inflation, it is food prices that will probably push overall inflation lower. A tobacco tax hike is clearly visible in the data coming out from Germany and, among the largest economies, is expected to take place also in Spain.
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Looking further out, July will most likely mark the trough in eurozone inflation throughout the forecast horizon. The fact that oil prices have stabilized at around USD 70 p/b for the time being suggests no tangible oil-driven upside risks to our projections.
