June 01, 2023
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EA: HICP Inflation Resumes Trend Lower

  • Flash EA inflation fell by 86bp to 6.11% in May-23, undershooting forecasts by 0.2pp. The outcome still resumes the downward trend since the Oct-22 peak.
  • Germany was the primary geographic source of the downside news for us, but energy prices were the weakest area. Transport, housing, and food are driving inflation down.
  • We expect another fall for similar reasons in June, albeit slightly smaller. Excessive underlying inflationary pressures remain inconsistent with reaching 2% sustainably.

By Philip Rush

May 24, 2023
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UK: The Exceptional Inflation Nation

  • Inflation slowed by much less than expected again in Apr-23 to 8.7% on the CPI (RPI 11.4%). That 0.4pp CPI surprise extends a worrying trend in the UK.
  • Broad strength across core goods and services means underlying inflation increased again while other countries slowly converged toward their targets.
  • State-sponsored second-round effects are creating painful inflationary exceptionalism in the UK. We now expect a 25bp rate hike in August beyond our existing June call.

By Philip Rush

May 17, 2023
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EA: Inflation’s Apr-23 Uptick Finalised

  • The final EA HICP inflation print confirmed the 0.1pp rise to 7.0% in Apr-23, while the ex-tobacco rate printed at 6.98%. Food price inflation has reassuringly subsided.
  • Underlying inflation’s impulse remains 2-3 times the target in Germany and France, but the trend is slowing, which should eventually create space for the ECB to stop hiking.
  • It’s too early to declare victory over inflation, so we expect the ECB to hike at least twice more this cycle and not cut until the second half of 2024.

By Philip Rush