ECB release a pre-economic bulletin note
The latest ECB economic bulletin is due on Thursday and they've released a note asking whether inflation has reached a turning point
- Turnaround in inflation since Feb has thus far been mainly due to energy and food prices
- Recent upturn in core HICP reflect a combination of persistent and temporary factors
- Strong oil price movements can blur the signal for core inflation
- Short-term measures of core HICP have shown a more sustained increase but provide only weak evidence of a turning point
- Other measures of underlying inflation have also increased inline with HICPX (core) and some have shown significant increases over recent months
- HICPX still includes volatile components such as package holidays, making it difficult to identify the signal at a certain point in time
- Overall inflation indicators have risen inline with Eurosystem staff macroeconomic projections
- Nevertheless on the basis of outturns observed so far it remains too early to identify a turning point in underlying inflation and more data is required for the signal for such a turning point to become strong enough
Inflation is going to be the main number that QE watchers will be looking at. If it gets above 1-1.5% well before September then the tapers calls will start being heard and the euro will start getting bullish
The full report is here
