Euro area’s headline inflation likely to come in at 1.7 pct in 2017 – Nordea Bank

Euro area’s inflation has been picking up very gradually since the debt crisis. Even if oil price developments raised the headline inflation for a temporary period of time at the start of 2017, the larger price pressures continue to be curbed. Core inflation has remained subdued at about 1 percent and the recent monthly changes barely indicate any signs of acceleration, noted Nordea Bank in a research report.

The brisk economic development is expected to finally push up wages and prices when excess capacity drops and firms gain more pricing power. This signifies a slight upward trend in future core inflation. But, there is a downside risk to this forecast, given that on average the most recent monthly changes have been even smaller than in the projection, stated Nordea Bank.

The anticipated changes in oil prices should keep the headline consumer price inflation quite constrained for the months ahead.

“We are likely to see headline inflation rates to drop close to 1 percent in the summer months before core inflation should bring numbers back to around 1.5 percent in the latter part of 2017”, added Nordea Bank.

Because of the recent softness seen in oil prices, the euro area’s headline inflation is expected to come in at 1.7 percent in 2017 and at 1.5 percent in 2018, according to Nordea Bank.

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