Eurozone inflation comes in slightly ahead of forecasts
The rate of consumer price inflation in the euro area slowed to a 0.3% year-on-year pace in August, according to preliminary data from Eurostat.
That was in line with the consensus estimate and followed a print of 0.4% in the month before.
At the so-called 'core' level, which strips out the most volatile items, such as energy, food, alcohol and tobacco, the rate of inflation edged slightly higher, to a 0.9% year-on-year clip (consensus: 0.8%), versus 0.8% in the month before.
Whereas some economists expect inflation to stabilise in September and then head gradually higher thereafter their forecasts have been falling since the start of the year, feeding doubts that the Eurozone may indeed be headed to at least a small period of falling prices, if not worse.
In particular, last Friday the President of the European Central Bank, Mario Draghi, explicitly acknowledged the recent drop in medium-term inflation expectations as embedded in financial markets.
That is a serious source of concern for the ECB even now, but more so should the trend continue. For that reason Draghi took a more conciliatory tone regarding whether countries in the Eurozone ought to be allowed to use what leeway they had to meet their public spending targets to help bolster demand.
Economists a little divided
"Disappointing data and comments by ECB President Mario Draghi at Jackson Hole have raised expectations of additional policy action at the upcoming ECB meeting," analysts from BNP Paribas said.
The French broker added that "poor growth and inflation are increasing the likelihood of QE, but with some Governing Council members unconvinced, an imminent launch, ahead of the first LTRO, is unlikely".
Analysts at Credit Suisse on the other hand do expect something to come out of next week's meeting.
"We now expect the ECB to launch a broad-based asset purchase programme - QE - by the end of the year. Importantly, we think this could be clearly telegraphed to markets as soon as next week's Governing Council meeting," analysts N.Hill and T.Maharaj wrote to clients on Friday morning before the above data was released.
Sharp drop in energy prices
Energy prices dropped 2% year-on-year in August, the figures from Eurostat further showed, following a 1% slide in July.
Inflation in non-energy industrial goods accelerated slightly, to a 0.3% pace from 0% in the month before.
Services price inflation slowed to a 1.2% pace from 1.3% in July.
The ECB will hold its next meeting on 4 September.
AB