**As seen in Risk In The Week report 09/22/23, subscribe at cablefxm.co.uk/reports
Eurozone August consumer prices eased to 5.2% Y/y from the prior 5.3%, the final revision came to undershoot the market expectation of 5.3%. The core metric eased to 5.3% Y/y from 5.5%, excluding energy and food slowed to 6.2% from 6.6%. Food prices posted the slowest rate in more than a year at 10.3% Y/y, the metric has risen by double-digits since June 2022. Energy prices deflated for a fourth consecutive month at -3.3% Y/y, however, the August print saw a monthly increase of 3.3%. The report was released preceding the ECB September monetary policy meeting and it helped to build expectations that the central bank could leave rates unchanged signaling the end of its tightening cycle. August inflation data will support this idea as core inflation is expected to continue easing, the median forecast sees the figure printing at 4.8%, a 1/2 of a percent slower than the prior. Progress in the headline might get bumped by the recent rise in global energy prices. The desk at UBS expects headline inflation to fall 0.8pp to 4.4% y/y, the lowest in almost two years, and core inflation to decline 0.7pp to 4.6% y/y, the lowest since August 2022. UBS said the decline will be mostly due to negative base effects from September 2022. Looking further into the details, UBS flagged a drop in German core CPI and a negative contribution from energy prices base effects worth 0.3pp to drive prices lower. UBS forecasts the ECB to stay unchanged until June 2023 and to deliver 25bps rate cuts every quarter after.
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