Just looking at various CPI numbers that have been popping up this morning, and the overall picture is confirming the euro zone flash estimate drop we had last week.

  • Sweden’s headline CPI fell to 0.1% from 0.2% y/y
  • Norway’s dropped to 2.8% from 3.2% y/y.
  • Dutch CPI for September was 2.4% vs 2.8% prior y/y

The only country to post higher inflation so far is Denmark. Headline CPI rose to 0.5% from 0.4% y/y with the European harmonised HICP coming in at 0.2% from 0.1% prior.

With Portuguese and Irish CPI to be released at 10 am gmt, it could add further inflation falls to the picture.

The UK is facing some upward inflation pressure as I read this morning that the power companies are likely to be raising prices this winter by 8-10%.

Of course we should expect some ebb and flow in inflation figures, but generally they are usually pretty stable and a trend lower in inflation is starting to show. I keep pointing to inflation because I believe it’s going to start (if it hasn’t already) to become a problem for the ECB. What they’ll be hoping for is that the economy picks up enough to add some upward pressure to CPI. The problem is that with unemployment so high wage inflation is not going to pick up anytime soon and overall there’s still a weak bias on consumer spending which is going to keep a lid on inflation as well.

It’s something we need to keep watch on as it may determine a shift in policy by the ECB. We’ve already had Mario Draghi talking rate cuts at his ECB presser and yesterday ECB’s Benoit Coeure mentioned combating deflation and that the economic outlook warrants an easing bias in monetary policy.

The ECB will be watching inflation very carefully and more so than they’ll let on but most importantly, I don’t think the market is taking heed of it. The focus is on Washington but we could be in for a shock at one of the ECB rate meetings in the near future.