Analysts are quickly cutting 2014 Eurozone inflation forecasts:
- Nomura cut their forecast for 2014 euro zone inflation to 0.6 percent, from 0.8 percent last month
- Barclays sees 2014 inflation 0.5 percent, with a dip to 0.4 percent over the summer
Reuters looks at how quickly estimates have been falling (and continued to fall) despite ECB action. Two years ago the median estimate for this year was 2.5%, now it’s 0.5%.
The ECB staff projection made in May was 0.7% but the risks are now clearly to the downside and that could spark further ECB action.
Eurozone consensus inflation
The X-factor in inflation is oil prices. A couple weeks ago, oil appeared to be headed toward a breakout but Brent has faded back to $112 today after hitting $115.71 in mid-June.
In addition, the ECB refrain that “there is no threat of deflation” already sounds tired and a change in tune threatens their credibility.
