Euro area: Higher inflation, lower growth – Nomura

Analysts at Nomura point out that the flash euro area HICP inflation for October increased to 2.2% y-o-y from 2.1% y-o-y in September and was in line with the consensus.

Key Quotes

“The core rate also climbed to 1.1% y-o-y in October from 0.9% y-o-y in September and was in line with the consensus.”

“We believe core inflation will accelerate further supported by a pick up in wage growth and higher inflation expectations.”

“When it comes to the ECB, it is worth noting there are some downside risks to the ECB’s staff growth projection, which will be released in December. Q3 economic growth slowed to 0.2% q-o-q from 0.4% in Q2 with recent survey data also having weakened. However, we do not expect the ECB to lower its inflation projections materially as the data are on course so far. Therefore, we believe the ECB will stick with its expectation to end asset purchases in December and will not change its forward guidance at the next meeting.”