Eurozone: Underlying price pressure remains weak – Commerzbank

Dr Jörg Krämer, Chief Economist at Commerzbank, suggests that the Eurozone’s core inflation rate, i.e. the year-on-year change in the consumer price index excluding energy, food and beverages, has stabilized at 1%.

Key Quotes

“The price-driving effect of the euro depreciation has passed its peak. Prices for imported industrial goods have not risen since April. Moreover, lower energy prices are dampening inflation pressure on other goods and services after a certain lag.

Contrary to observations made in the past, falling unemployment has yet to lead to stronger wage pressure, which is presumably due to the still very high level of unemployment.

The core rate looks set to remain at 1% until the end of 2016. Headline inflation will climb back towards 1% in the second half of 2016 due to energy price trends. On an annual average, consumer prices should rise by 0.3%. For 2017, we forecast an inflation rate of 1.6%. But there is considerable uncertainty over the inflation outlook in view of oil prices and the euro.”