**As seen in Risk In The Week report 03/30/24, subscribe at cablefxm.co.uk/reports
European February headline consumer prices stayed unchanged from the preliminary reading at 2.6% Y/y, in line with the consensus forecast. The metric slowed from January's 2.8%, the release confirms the euro area remains on the disinflationary path. February saw stickiness from restaurant and hotel prices and the food component, contributing to the headline with more than 1/2 of a percentage point. We will receive price data from EU countries heading into Wednesday, so far Italian and French CPI came below economists' estimates, the former ticked up to 1.3% Y/y from the prior 0.8%.
Looking ahead, March price data is expected to be impacted by the Easter holidays, the desk at ING said this should add to inflation but it will be subtracted in the months ahead. Services inflation will be in focus and ING sees the metric coming higher in March, they noted that the print will be difficult to look through as the ECB heads into the April meeting. ING pencils headline CPI rising by 2.5% Y/y and the core print at 3.0%, if materialized, both readings will be softer than the prior. Deutsche Bank strategists commented on possible paths of action for the ECB, they warned that there is a high degree of uncertainty as some believe a regime of low growth/low inflation is likely to return. Deutsche Bank sees the ECB delivering 125bps of rate cuts this year and forecasts a terminal rate of 2.0% by mid-2025.
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