MNI Eurozone Inflation Insight – September 2024
MNI (LONDON) - PDF ANALYSIS HERE: Sep2024EZCPIReview.pdf
The September Eurozone flash inflation round started with significant downside surprises from France and Spain. These prints were not only driven by lower energy prices but also softer core components, prompting a further dovish adjustment of market expectations towards an October ECB cut.
Following Monday’s national-level releases, ECB President Lagarde also noted to the EU Parliament that the “latest developments [in inflation] strengthen our confidence that inflation will return to target in a timely manner” and that the ECB will “take that into account in [the] next monetary policy meeting in October.”
Taken alongside a weak set of September flash PMIs, an October ECB cut is now 95% implied in meeting-dated OIS contracts, and the base case amongst almost all sell-side analysts we track.
While country-level data from the likes of Germany and Italy did not generate a downward surprise as in France and Spain, the Eurozone-wide print nonetheless undershot the ECB’s Q3 core inflation projection by 10bps at 2.8% Y/Y. Headline inflation also came in soft, averaging 2.2% in Q3, below the ECB’s 2.3% projection.