• We have refined our inflation forecasts for October. In the eurozone, we confirm our -0.2% yoy call on headline inflation, with broadly balanced risks. HICP ex tobacco should come in at -0.3% yoy. In both cases, prices should be up 0.2% mom.

  • In the eurozone, the rise in the yoy inflation rate vs. September will be driven by the energy component. Even though energy prices probably fell on monthly basis, the steep decline in the price of oil products in October 2008 will push up the yoy rate. We estimate that energy will attach 0.2pp to the headline inflation rate. Food inflation will probably decline a bit further in yoy terms, but October is probably going to be the trough. Core inflation likely eased another notch to 1.1% yoy, holding on a declining trend.

  • The oil price rally continued in the last week: euro-denominated Brent prices are now up 17% vs. the October 5 level. The bulk of the impact on HICP will be felt in the November release, when in the eurozone we will most likely see a return to a positive inflation rate. Though the estimate is very preliminary, we think that in November inflation could come in at around +0.4% yoy. At year-end, we continue to see headline inflation at or just below 1% yoy.