Euro area core inflation remains unchanged in November, dampens hope of stronger underlying inflation

Euro area’s core inflation has again surprised to the downside in November. The year-on-year core price inflation remained at 0.9 percent as against the consensus expectations of 1.1 percent. The fall in October was not an outlier and the central bank’s hopes of a stronger price momentum have been dampened again. The headline price index rose to 1.5 percent year-on-year from 1.4 percent on markedly higher energy prices.

The rise in the core rate in the spring to 1.2 percent at one point has therefore not proven lasting. It was mainly because of the price leap in package holidays and accommodation. Tourism firms had raised prices considerably after the crises in turkey pushed up the demand for travel to southern Mediterranean nations especially. The pace of inflation for these services had risen to 7.6 percent in March, while the price premium more than halved at the end of the summer season.

The pace of inflation for all goods and services rose again marginally in November to 1.5 percent from 1.4 percent in the prior month, owing to surge in crude oil price, which led to a stronger rise of energy prices. The inflation data for November has hampered hopes of a stronger underlying inflation.

“The ECB will have to be patient for a while longer before strong economic growth starts to drive inflation. An interest rate rise is likely to be on the agenda in mid-2019 at the earliest”, added Commerzbank.

At 15:00 GMT the FxWirePro's Hourly Strength Index of Euro was highly bullish at 145.211, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at -46.4415. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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