A cut at the January 30 ECB meeting remains almost fully priced in by markets.
- The December Eurozone flash inflation round saw the third consecutive reacceleration from cycle lows in September to a headline of 2.4% Y/Y as expected on the back of energy base effects. The core measure meanwhile remained unchanged at 2.7%, with services edging up to 4.0% and core goods remaining subdued at 0.5%.
- Across countries, there were some considerable differences to consensus, with Germany and Spain both surprising to the upside by 0.2pp (both printing 2.8% Y/Y), but France and Italy coming in below expectations (1.8% vs 1.9% cons and 1.4% vs 1.6%, respectively).
- Looking ahead, January’s release of Eurozone inflation will be of elevated importance due to the yearly repricing of a large set of services subcategories, the annual basket reweighting, as well as some idiosyncratic factors coming into play.
- While market pricing for ECB meeting-dated OIS further in the future has moved more hawkish over the release, a cut at the January 30 ECB meeting remains expected.
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