Eurozone: Inflation and ECB meeting minutes – Danske Bank

Next week, the calendar shows among the most relevant events, inflation data and the European Central Bank minutes. Analysts from Danske Bank expect March core inflation stayed at 1.0% as the Easter effect will exert downward pressure on service price inflation.

Key Quotes: 

“In the euro area, we await the preliminary March HICP inflation numbers on Monday. In February, headline inflation came in at 1.5% y/y, while core inflation fell to 1.0% y/y. Despite a strong pickup in wages, core inflation has fluctuated around this level for the last one and a half years. Although we still expect core inflation to climb higher in 2019, we foresee the March core inflation print staying at 1.0% y/y, as the Easter effect will exert downward pressure on service price inflation, which might be even more pronounced following the methodological changes to German package tours. For headline inflation we see scope for a rise to 1.7% y/y, driven by increasing energy prices.

“On Thursday, we get minutes from the March ECB meeting. At the latest meeting the ECB announced a new series of TLTRO3, opened the door for further easing, and extended the forward guidance to rates remaining at present levels ‘at least through the end of the 2019’. We are particularly interested in the details of the discussion of the TLTRO3 announcement from members of the Governing Councils.”

“Judging from recent communication, the ECB has become increasingly concerned about the side effects of a prolonged period of negative rates on bank profitability. However, we do not expect a discussion on a tiered deposit system to already have taken place.”