Eurozone’s inflation likely to have accelerated in September

Euro area’s headline inflation is expected to have accelerated in September after posting a stable reading in the previous month. According to a Societe Generale research note, the currency bloc’s inflation is expected to have risen three ticks to 0.5 percent, year-on-year, the highest since June 2014. The rebound in inflation predominantly reflects the effect of base effects from prices of energy.

The energy component is expected to record a small monthly rise of 0.3 percent, whereas the year-on-year rate would possibly increase to -3.6 percent in September from -5.6 percent in the previous month. Meanwhile, food prices are expected to have weakened for the second consecutive month after recovering sharply in July. However, the drop is expected to be just marginal.

On the other hand, core inflation is likely to have remained stable due to stable services and non-energy industrial goods prices. Core inflation had fallen by a tick in August. Excluding tobacco, HICP inflation is expected to have come in at 0.4 percent year-on-year in September. Looking ahead, inflation in the euro area is expected to keep improving and rise more than 1 percent by the end of 2016, led by base effects from energy prices, noted Societe Generale.

“Overall headline inflation is expected to average 0.3 percent in 2016 and 1.5 percent in 2017, while the core metric should average 0.9 percent in 2016 and improve only marginally to 1.1 percent in 2017”, added Societe Generale.