Some budding hope for Europe’s inflation outlook? | Forexlive
Headline annual inflation may have moved up slightly to 7.0% but the good news is that there is a marginal slowdown in core annual inflation to 5.6% in April. That is the first time that core annual inflation has eased since June last year, helped by a fall in food price inflation as well.
The report showed that processed food, alcohol and tobacco inflation slowed by 1% to 14.7% and that might be suggestive of a turnaround in food price inflation that the ECB has been waiting for quite a while now.
At this stage, one month’s worth of data is not indicative of any trend – as we have come to find out on two previous occasions when it comes to a decline in core annual inflation:
For now, this does at least give reason for the ECB to go with a 25 bps move on Thursday. But if they really want to spin the narrative for a 50 bps rate hike, they have every reason to choose to do so as well.
But judging by the market’s initial reaction, it seems like traders are comfortable to stick with the current pricing – which shows roughly 80% odds of a 25 bps move (based on €STR).