Forex Flash: Eurozone inflation predicted at 2.0% in Q2 2013 – Goldman Sachs (Barcelona) - According to the Economics Research Team at Goldman Sachs, “A decline in the growth sensitivity of inflation would allow the ECB to remain accommodative for longer. This is because inflationary pressures resulting from stronger growth would also arise later than would previously be the case.”

Euro area inflation stood at 2.2% in December, unchanged on the November reading and only slightly above the ECB’s target of “below but close to 2.0%”. According to the Economics Research Team at Goldman Sachs, “We expect inflation to moderate and decline to below 2% in the second quarter of this year.” Meanwhile, core inflation continues its gradual downward trend, and is currently at 1.6%.

What is noteworthy about the behavior of Euro area inflation is its relative stability during the crisis. To be sure, headline inflation rose sharply to 4% during the summer of 2008 on the back of a rise in energy prices, and subsequently fell sharply to -0.6% a year later. Nonetheless, the average of headline inflation from the summer of 2008 until now is 1.9%, bang in line with the ECB’s target.