Core rate up (no typo) to 0.9%
As expected, the Euro-area inflation rate fell to 0.3% y/y in August, mainly driven by energy. In EUR terms, the Brent oil price declined by 2.5% over July and had also fallen in July over June. I will not get tired repeating that a lower energy bill is a good thing for the Euro area. The core rate (ex food, energy, alcohol and tobacco) surprisingly rose to 0.9% y/y (from 0.8% in June and July), so no additional pressure on the ECB from this side at least.
The unemployment rate remained unchanged at 11.5% in July. Needless to stress that all these numbers will be part of what ECB policy makers will have to consider next Thursday. We will preview the upcoming ECB meeting in a separate piece.
In the very short term, oil/energy prices will determine whether inflation will move even lower in September. Our baseline scenario is that we stay at 0.3% y/y. We expect inflation to pick up moderately (to ¾% y/y) in Q4 due to base effects in energy prices and because the weaker EUR starts to feed through.
Nordea