A couple of previews of the EUR inflation data due today, I've bolded a few bits


  • We forecast euro area "flash" headline HICP to ease 0.1pp to 1.2% in February
  • while core to remain unchanged to 1.0%.


  • We forecast the flash estimate of euro area HICP inflation to remain at 1.3% y-o-y in February.
  • In contrast, we expect core inflation to increase to 1.1% y-o-y from 1.0% y-o-y in January.
  • A likely step-up in the prices of volatile items (e.g. packaged holidays) and a more generic shrinkage of slack should push up services sector inflation a little compared with last month.


An increasing number of investors fear that inflation will rise more sharply and that central banks will have to take action to counter this acceleration. These fears are exaggerated, at least so far as the euro zone is concerned.

  • February consumer price data should act as confirmation of this view. The marked decline in energy prices should push the headline rate of inflation down to 1.1%.

We expect the year-on-year rate of core CPI inflation (excluding the volatile prices of energy, food, alcohol and tobacco) to remain unchanged at 1.0%. ...Despite strong economic growth and an appreciable decline in unemployment, underlying inflation pressure remains weak in the euro zone. This is mainly due to two reasons:

  • The sharp drop in the unemployment rate for the euro zone from a peak of 12.1% to 8.7% at present is mainly concentrated in Spain and other peripheral countries, where unemployment is still very high.
  • Unemployment will have to keep falling sharply before wages in these countries can rise more strongly. Due to globalisation and increasing digitalisation, wages today grow more slowly for any given unemployment rate than they used to.

Correspondingly, we assume that the core rate of inflation will not exceed 1.0% for any sustained period in 2018.

  • For February, we see this rate unchanged at 1.0%. It could even fall back to 0.9% if the normalisation of the inflation rate for package holidays and hotel accommodation continues

The headline rate of inflation could even fall from 1.3% to 1.1%. This is against the backdrop of the marked decline in energy prices, which fell by an estimated 1.5% on January. This pushes their year-on-year rate down from 2.1% to 0.8%, which in itself lowers the headline rate of inflation by 0.15 percentage points.