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Enron Mail |
Decline in euro area HICP inflation confirmed
Euro area headline HICP inflation (October) Actual 2.4% UBSW 2.4% Consensus 2.4% Previous 2.5% Euro area core HICP inflation (October) Actual 2.3% UBSW 2.3% Consensus 2.2% Previous 2.2% Bottom line: Euro area headline inflation decelerated as expected to 2.4% in October from 2.5% due to energy prices. This is in line with consensus expectations and the "flash" estimate published by Eurostat earlier in the month. Euro area core inflation (CPI less all food and energy) accelerated to 2.3% in October from 2.2% in September. This was above initial consensus estimates of 2.2% but probably widely expected following preliminary French and German national CPI data which indicated higher core inflation. The rise in core inflation is clearly an issue for the ECB but we would expect them to play down the acceleration in core inflation and focus instead on the fall in headline inflation. Headline inflation was 2.0% or below in 4 economies in October, up from 3 in September. The ECB expects headline inflation to decelerate sharply during early 2002 - the recent declines in oil prices, if sustained, are likely to add to that sentiment. We expect slower growth leading to lower pipeline inflation pressures along with base effects to generate firm expectations of a marked decline in inflation during 2002. This underpins our expectation of a further 50bp of policy rate cuts from the ECB in Q1 2002.
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