7 Jan 2015
Eurozone HICP falls to -0.2% on low oil prices – TDS
FXStreet (Barcelona) - The TD Securities Team notes that low oil prices have played their part as Eurozone HICP prints a negative number, falling to -0.2%yoy, further share that this might lead to a broader buying program by the ECB.
Key Quotes
“German unemployment fell to 6.5%, better than the flat reading of 6.6% expected, while Eurozone flash HICP fell from 0.3% to -0.2%, a tenth lower than expected but in line with where the market had already moved after the German and Spanish prints over the last week.”
“Core inflation was a tenth higher than expected, rising from 0.7% y/y to 0.8%, but itself is still weak as there were decent base effects that as of a month ago, were suggesting we would get back to 1% core inflation. So while we don't have details beyond the aggregates at this stage, it does look like we are getting some passthrough of low headline and low oil prices into core.”
“This will not come as comfort to those on the Governing Council arguing for broader and larger asset purchases. With headline at -0.2% y/y and the ECB worried about anchoring inflation expectations, even if lower oil prices is unequivocally positive for Eurozone GDP, that should be enough to get the votes for broader buying on Jan 22, but there is still no decision on composition as there is still no agreement on the potential effects. And the consensus that growth should improve on its own complicates the hopes of some for aggressive asset purchases from the ECB.”
Key Quotes
“German unemployment fell to 6.5%, better than the flat reading of 6.6% expected, while Eurozone flash HICP fell from 0.3% to -0.2%, a tenth lower than expected but in line with where the market had already moved after the German and Spanish prints over the last week.”
“Core inflation was a tenth higher than expected, rising from 0.7% y/y to 0.8%, but itself is still weak as there were decent base effects that as of a month ago, were suggesting we would get back to 1% core inflation. So while we don't have details beyond the aggregates at this stage, it does look like we are getting some passthrough of low headline and low oil prices into core.”
“This will not come as comfort to those on the Governing Council arguing for broader and larger asset purchases. With headline at -0.2% y/y and the ECB worried about anchoring inflation expectations, even if lower oil prices is unequivocally positive for Eurozone GDP, that should be enough to get the votes for broader buying on Jan 22, but there is still no decision on composition as there is still no agreement on the potential effects. And the consensus that growth should improve on its own complicates the hopes of some for aggressive asset purchases from the ECB.”