Danske Research Team
Danske Bank A/S
Euro inflation declined back to 0.3% y/y in November after 0.4% y/y in October. The latest decline in oil prices means that we currently expect inflation to decline to 0.1% y/y in December. That is very close to the deflation limit, and the pressure on the ECB continues to increase.
The decline was driven by lower energy price inflation, which was -2.5% y/y in November down from -2.0% y/y in October. The very low energy price inflation is due to the sharp drop in oil prices since September. However, it does not include the latest decline after OPEC announced that it would not cut production in an effort to curb the drop in the oil price, and we expect energy price inflation to decline further in December.
Food price inflation was unchanged at 0.5% y/y in November. The monthly rate has been positive since September and the higher consumer food prices reflect a lagged impact of the higher global food prices at the beginning of 2014. We expect food price inflation to decline a little in coming months, mainly due to a negative impact from base effects.
Core inflation was unchanged at 0.7% y/y in November. This reflects slightly lower service price inflation and a little higher inflation on non-energy industrial goods. The lower service price inflation is driven by a decline in the German figure, which was affected by lower inflation on package tours. Overall, core inflation is being kept low due to slack in the labour market, but is supported by the weaker euro as it gives higher imported inflation. Based on this, we expect core inflation will stay around current levels in coming months.
This publication has been prepared by Danske Bank for information purposes only. It is not an offer or solicitation of any offer to purchase or sell any financial instrument. Whilst reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and no liability is accepted for any loss arising from reliance on it. Danske Bank, its affiliates or staff, may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives), of any issuer mentioned herein. Danske Bank's research analysts are not permitted to invest in securities under coverage in their research sector.
This publication is not intended for private customers in the UK or any person in the US. Danske Bank A/S is regulated by the FSA for the conduct of designated investment business in the UK and is a member of the London Stock Exchange.
Copyright () Danske Bank A/S. All rights reserved. This publication is protected by copyright and may not be reproduced in whole or in part without permission.
Recommended Content
Editors’ Picks
EUR/USD clings to gains above 1.0750 after US data
EUR/USD manages to hold in positive territory above 1.0750 despite retreating from the fresh multi-week high it set above 1.0800 earlier in the day. The US Dollar struggles to find demand following the weaker-than-expected NFP data.
GBP/USD declines below 1.2550 following NFP-inspired upsurge
GBP/USD struggles to preserve its bullish momentum and trades below 1.2550 in the American session. Earlier in the day, the disappointing April jobs report from the US triggered a USD selloff and allowed the pair to reach multi-week highs above 1.2600.
Gold struggles to hold above $2,300 despite falling US yields
Gold stays on the back foot below $2,300 in the American session on Friday. The benchmark 10-year US Treasury bond yield stays in negative territory below 4.6% after weak US data but the improving risk mood doesn't allow XAU/USD to gain traction.
Bitcoin Weekly Forecast: Should you buy BTC here? Premium
Bitcoin (BTC) price shows signs of a potential reversal but lacks confirmation, which has divided the investor community into two – those who are buying the dips and those who are expecting a further correction.
Week ahead – BoE and RBA decisions headline a calm week
Bank of England meets on Thursday, unlikely to signal rate cuts. Reserve Bank of Australia could maintain a higher-for-longer stance. Elsewhere, Bank of Japan releases summary of opinions.