Eurozone: Headline and core inflation to drop back in May

On Tuesday, inflation data from the Eurozone is due. Analysts from Danske Bank expect both headline and core inflation to drop back in May, to 1.6% and 1.1%, respectively. 

Key Quotes: 

“Euro area HICP figures are due out on Tuesday, 4 June. In April, the ‘Easter effect’ pushed core inflation up by 0.5pp to 1.3% y/y but the May print will probably be a more reliable guide to the trend in actual underlying inflation pressures. As the Easter boost to travel-related service prices wanes, we expect both headline and core inflation to drop back in May, to 1.6% and 1.1%, respectively.”

“The inflation print will also be of key interest for the ECB in light of the recent decline in market-based inflation expectations. At the meeting on 6 June, we expect the ECB to maintain its easing bias, with no new additional stimulus measures announced. The update of the staff projections is unlikely to change much for inflation, but we see a downside risk to the 2020-21 growth forecast from its already low level.”
 

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