Euro area – CPI likely matched the flash at 0.3%

The final euro-area CPI inflation rate for May, due on 17 June, is expected to match the flash release at 0.3% y/y, up from 0.0% prior. Core CPI likely also matched the flash, up to 0.9% y/y. Although this likely inflation pick-up has happened sooner than expected, it is too early to declare the European Central Bank's job done. 

The two factors likely contributing to this pick-up are the recent sharp rise in oil prices and euro depreciation in the past year; the detailed report will reveal whether there were special - temporary - factors behind the unexpected surge in core inflation. 

In the medium term, inflation will likely remain subdued as long as there is significant spare capacity in the economy that needs a sustained period of above-trend growth in order to shrink.