MNI Eurozone Inflation Preview – April 2024

EXECUTIVE SUMMARY

Underlying Eurozone inflation is expected to dip again in April, with core HICP declining for a 9th consecutive month to 2.7% Y/Y (2.9% prior), though headline is set to stall at 2.4% Y/Y (2.4% prior). In short, services price disinflation is expected to drag core inflation lower, while headline is set to be underpinned by Y/Y upticks in energy and food prices.

• A reading in line with consensus would provide further “confidence that inflation is converging to the [inflation] target in a sustained manner” (per the April monetary policy statement) for the ECB to start cutting rates as expected in June, and indeed, even a modest upside miss might not be enough to push back the initial cut.
• As our review of the April ECB meeting put it, even if price data does not materially improve by June, as long as there is no significant reversal, the ECB will initiate the first cut. However, we are reaching a point in the inflation cycle in which the underlying dynamics will be increasingly scrutinised to see whether the progress seen so far is on track to continue, and therefore how much further the ECB can cut beyond the first move.
• Our preview includes analysis of price categories to watch, assessments of underlying inflation trends, outlooks for the French, German, Spanish, and Italian national inflation prints, and sell-side analyst previews.

FOR FULL PDF ANALYSIS:

Apr2024EZCPIPreview.pdf