Eurozone: Inflation to tick a bit lower in August - TDS

Analysts at TD Securities are looking for Eurozone inflation to tick a bit lower in August, with core CPI slipping from 1.1% to 1.0% y/y (mkt 1.1%), and headline CPI from 2.1% to 2.0% y/y (mkt 2.1%).

Key Quotes

“Risks appear balanced as while the Spanish and German figures support the downside miss, rounding to two decimal places puts a slightly higher hurdle to print lower this month.”

“We look for core inflation to start showing a bit more upward momentum once we get into early 2019, which is something that we will eventually need to see in order for the ECB to be comfortable raising rates in the second half of the year. But for now core CPI should remain rangebound.”

“Fitch is already scheduled to review their ratings of Italy sovereign debt, to be released after European market close. They have flagged earlier this year the risks from political uncertainty and incompatibility of the government's spending and taxation initiatives to do anything but worsen the deficit. But as we don't yet have specifics on the upcoming budget, it may be difficult for Fitch to have any clear direction.”