Eurostat to release its August 2018 Eurozone CPI inflation report

14 / 09 / 2018 | Market News
Next week will start strong on Monday September 17th 2018 with the global financial markets expecting to scrutinise data regarding the Eurozone’s Consumer Price Index (CPI) inflation. On Monday, Eurostat which is the official statistical office of the European Union (EU) will be releasing the finalised inflation data as it was recorded by the EU’s services during August 2018. 

Eurozone CPI inflation estimates

The CPI is an indicator used to measure the rate at which the prices of goods and services bought by households rise or fall, which is the rate of inflation, referred to as the CPI inflation. Eurostat will also include core CPI data in the data release, which measures price movements excluding the ones of volatile components such as food, energy, alcohol and tobacco.

A poll by Bloomberg published on September 11th 2018 showed that the majority of economists expect the Euro bloc’s CPI inflation to come in at 2% in August 2018 on an annualised basis, matching the July’s 2018 reading. On a month-to-month basis, the CPI inflation is likely to come in at 0.2%, significantly higher than the -0.3% figure recorded in July 2018. Analysts suggest that the finalised data regarding the core CPI inflation during August 2018 will show that it remained stable at 1%. 

The ECB aims to keep inflation below, but close to, 2% over the medium term. However, the ECB’s monetary policy so far, despite the quantitative easing (QE) programme applied in recent years, has not succeeded yet in bringing inflation close to its target. A report by BNP Paribas, which is one of the largest banks in terms of capitalisation in Europe, said that Eurozone inflation has grown quickly since the beginning of the year and is near or above 2% in France and in the whole Eurozone which is at its highest since 2012. 

BNP Paribas’ analysts noted that “this is not really welcome for households and especially those with low income because it affects daily expenses such as food and energy, which are hard to cut back on. The energy sector explains about 70% of the inflation increase since the beginning of the year. This pick-up in prices might be unwelcome but could be temporary as energy prices are, by nature, volatile.” In the report, it was stressed that the European Central Bank (ECB) focuses on core CPI inflation and that it aims for a non-transitory headline CPI inflation rate of 2% without being in need to increase its interest rates. 

ECB keeps interest rates unchanged

The ECB’s governing board, headed by Mario Draghi, convened in Frankfurt on Thursday September 13th 2018 to decide on interest rates. The Eurozone’s central bank board announced that it would keep interest rates unchanged at 0%. The decision was expected by economists. A report published by Westpac said that the ECB’s board meeting affirmed the forward guidance set out in June 2018. “Risks to the outlook continue to be described as ‘balanced’ but it is here Draghi touched on some particularly prescient issues. In June, we were told that asset purchases will be tapered again from October before ending completely in December, and that interest rates are on hold until the end of next summer. The ECB’s macroeconomic projections saw a slight downward revision in the growth outlook due to lower external demand,” was noted in the report. 

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