Eurozone: Significant fall in inflation - ING

Bert Colijn, senior economist at ING, suggests that for the Eurozone headline inflation is dropping as the decline in oil prices is working its way through to fuel prices in the region.

Key Quotes

“The decline to 1.4% in January was significant, but is not yet the bottom of what is to be expected. As base effects of the energy price index continue to have a dampening effect on inflation in the months ahead, the headline rate is expected to slow further towards the summer. Only at the end of the year is a recovery expected again.”

“The big question remains what will happen to core inflation, which has been stubbornly stuck at around 1% for ages. Wage growth picked up substantially over the course of 2018 as labour markets tightened, but businesses have not yet passed on these higher costs to customers.”

“The ECB’s own expectations of 1.4% core inflation for the year look a tad optimistic already, meaning that downward adjustments could well happen in March.”