Euro areas December preliminary HICP to show negative inflation – ANZ

FXStreet (Barcelona) - Brian Martin of ANZ, anticipates the December preliminary HICP release for the euro area to show a negative headline inflation at -0.1% y/y, further noting that the ECB will do everything possible to ensure this doesn’t translate into deflation.

Key Quotes

“The December preliminary HICP release for the euro area is expected to show that headline inflation fell to -0.1% y/y, its weakest growth since October 2009. The anticipated drop is chiefly a result of the collapse in oil prices. The last time euro area inflation was negative was in 2009, when it spent five months below zero.”

“Weakness in the domestic economy is also adding to the absence of price pressures. The December manufacturing PMI came in at 50.6, slightly below expectations as both the French (47.5) and Italian (48.4) PMIs disappointed.”

“The ECB needs to try and anchor inflation expectations. Whilst the ECB’s survey of professional forecasters shows inflation expectations five year’s forward are 1.8%, the ECB’s fear is that persistently low inflation could weigh on this. Financial market implied inflation expectations fell sharply last year. In line with its mandate, the ECB will do everything possible to ensure negative inflation does not translate overtime into deflation.”