Euro area HICP: Headline rate to fall back to 1.6% y/y from April’s 1.9% - RBC CM

In view of analysts at RBC Capital Markets, the combined effect of Easter related price rises dropping out of the index and falling petrol pump and home heating oil prices should combine to push euro area inflation lower in May.

Key Quotes

“We expect the headline rate to fall back to 1.6% y/y from April’s 1.9%. As closely watched this month, however, will be the evolution of core inflation, which jumped to 1.2% y/y last month from 0.7% y/y previously. We think that around half of that rise can be attributed to those categories of the inflation basket most impacted by the timing of Easter. With that effect removed, we would expect core inflation to fall back to 0.9–1.0% this month, approximately the level at which it has held for most of the last two years.”

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