ECB growing more concerned about weak inflation?

Europe could well impact the global market tone next week and mostly toward the end of the week when the European Central Bank meets on Thursday and then growth sentiment readings hit the tapes the next day. 

The focus in the ECB meeting is going to be on a richer inflation dialogue that picks up where it left off at the meeting on September 3rd. Recall that the minutes to that meeting emphasized downside risks to inflation and growth: "inflation was now expected to pick up more slowly than previously expected and there were downside risks to the September 2015 ECB staff projections for inflation." 

At that meeting there was cautious optimism that core inflation was more resilient than headline: "underlying inflation, was rising over the projection horizon and had largely developed in line with earlier expectations" and that "compared with the turn of the year, the risk of broad-based deflation pressures was low and had decreased". 

The issue at hand is whether ECB officials are now growing more uneasy about this latter argument. Core inflation across the Eurozone slipped a touch further to 0.9% y/y in the September estimate. More recently, the Euro softened quite a bit in the wake of remarks by ECB Governing Council member Ewald Nowotny who remarked that "One has to say that we're clearly missing the target. The main fault for this is the dramatic fall in the price of oil and raw materials. One has to say that these are elements the central bank cannot influence, but also core inflation rates are clearly below the target." Nowotny is known to be a dove and therefore this dents the surprise factor somewhat. Nevertheless, Nowotny's focus on core inflation is significant as it carries on the dialogue from the ECB meeting on September 3rd and ahead of next week's meeting.