Aug HICP: GS Adjusts Infl Forecasts; HSBC, ING Lean To Sept Hike (1/2)

Multiple analysts weigh in on ECB / inflation views on the back of the in-line August core HICP print / above-expected headline:

• Goldman Sachs: Adjusts its forecasts post-Aug flash data: Dec 2023 core HICP to 3.9% Y/Y (was 4.0%); headline 3.8% (3.5% previously). "We continue to expect a gradual cooling in sequential core goods pressures, but forecast sequential core services pressures to remain sticky." They note that SA M/M core inflation came in at 0.34% M/M by their estimates in August, 9bp below July, with core goods 0.33% and services 0.28%.
• Deutsche: "The details of the print suggest that services prices may have been a little weaker than anticipated. This should matter to the ECB as this sub-component of the inflation basket is often considered a good proxy for domestic underlying inflation momentum. For a variety of technical reasons, the inflation rate of services most likely peaked in July 2023. The main uncertainty moving forward will be how fast and far services inflation rates drop as the weakening growth momentum will be counteracted by persistently elevated wage inflation.”
• HSBC: “The big question of today is whether the slight drop in core inflation - combined with rising growth concerns … will be enough to convince the ECB to pause in September… underlying inflationary pressures remain elevated, particularly in the services sector… Psychologically, the fact that headline inflation didn't fall for the first time in five months could be a reminder of the upside risks to inflation which could come from renewed energy prices, as also flagged in ECB President Christine Lagarde's Jackson Hole speech. Plus, we are still getting more fiscal support coming through…” ·
  • “Overall, we still see a bigger chance of the ECB hiking rates one last time in Sept - and possibly signalling a pause after as a trade-off - rather than not. But today's inflation print has made the picture a little blurrier.”
• ING: “The overall trend in inflation remains cautiously disinflationary … developments in goods and services inflation were more or less as expected.” “While inflation remains stubborn enough to make ECB hawks uncomfortable, it does look like a further deceleration in inflation is in the making for the months ahead. Given the ECB mantra over recent months that doing too little is worse than doing too much in terms of hikes, we still expect another 25 basis point rate rise, despite this being a close call."