STIR: French Flash HICP Will Guide Eurozone-wide Tracking

Following the release of the French August flash inflation data (due at 0745BST/0845CET), we should have a better idea of where Eurozone-wide inflation (due at 1000BST) is headed. The revised analyst consensus as of yesterday afternoon saw a material risk of a 2.1% Y/Y EZ-wide print (vs 2.2% initially expected), which helped EUR STIRs see a light dovish adjustment overall.

• However, with Dutch flash inflation above expectations at 3.3% Y/Y (vs 3.1% cons) this morning, a higher-than-expected French release could see yesterday’s adjustment more-than reverse. We will release our tracking estimate of EZ-wide HICP shortly after the French print.
• ECB-dated OIS currently price 67bps of easing through the remainder of this year, with 39bps of cumulative cuts priced through the October meeting.
• Yesterday evening, Bundesbank Governor Nagel struck an unsurprisingly hawkish tone, warning against lowering policy rates too quickly.
• Similar preferences for a gradual easing of policy have been expressed across the GC, seemingly setting a high bar for a 25bp cut in October (with a 25bp cut at the Sep 12 meeting fully priced at this stage).