Eurozone: Attention on the initial CPI inflation estimate May – Lloyds Bank

The analysis team at Lloyds Bank points out that today in the Eurozone, attention will be on the initial CPI inflation estimate May after April’s inflation was significantly higher than in March and back at the ECB’s inflation target.

Key Quotes

“Much of the acceleration, however, was due to temporary factors such as the timing of Easter. So we expect both the ‘headline’ and ‘core’ inflation measures to have softened in May. Indeed yesterday’s lower than expected outturns for Germany and Spain point to an even larger than forecast deceleration.”

“The April pickup in inflation helped boost expectations that the ECB may soon signal an end to its asset purchase programme.  However, ECB President Draghi has cautioned against expecting policy to move too quickly, noting that more evidence is required that inflation is returning to target on a sustained basis. A decline in inflation in May should help to reinforce this message. We expect the ECB to sound more upbeat about the economy at its 8th June meeting, paving the way for an announcement later this year that the QE programme is set to be cut back further in 2018. But the probability of policy tightening in 2017 remains low.”