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ECB: Lane Dovish On Service Inflation Prospects

ECB
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ECB’s Lane's speech on "Underlying inflation: an update" pointed to further confidence that inflation is heading towards the 2% target “in the course” of 2025. 

  • "[T]he analysis of underlying inflation suggests that 2024 is a transition year, in which backward-looking components are still playing out. But the analysis of underlying inflation also indicates that the disinflation process is well on track, and inflation is set to return to target in the course of 2025."
  • Dovish on service inflation prospects: “The PCCI for services indicates that there is currently a sizeable gap between services inflation and its medium-term underlying trend, suggesting there is scope for downward adjustment in services inflation in the coming months.”
  • “While services momentum (i.e. the three-month-on-three-month growth rate of the seasonally-adjusted index) remains high, it has been continuously easing since May. The month-on-month seasonally-adjusted rate markedly dropped in September” [see chart below]
  • “The latest information from surveys reinforces the projection of easing wage growth that will underpin the moderation in services inflation and domestic inflation.”
Source: ECB
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ECB’s Lane's speech on "Underlying inflation: an update" pointed to further confidence that inflation is heading towards the 2% target “in the course” of 2025. 

  • "[T]he analysis of underlying inflation suggests that 2024 is a transition year, in which backward-looking components are still playing out. But the analysis of underlying inflation also indicates that the disinflation process is well on track, and inflation is set to return to target in the course of 2025."
  • Dovish on service inflation prospects: “The PCCI for services indicates that there is currently a sizeable gap between services inflation and its medium-term underlying trend, suggesting there is scope for downward adjustment in services inflation in the coming months.”
  • “While services momentum (i.e. the three-month-on-three-month growth rate of the seasonally-adjusted index) remains high, it has been continuously easing since May. The month-on-month seasonally-adjusted rate markedly dropped in September” [see chart below]
  • “The latest information from surveys reinforces the projection of easing wage growth that will underpin the moderation in services inflation and domestic inflation.”
Source: ECB