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EUR: Inflation below target to force ECB to act - SocGen

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Feb 17, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

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    Research Team at Societe Generale, suggests that the Eurozone’s annual inflation is not likely to exceed 1.5% in the foreseeable future.

    Key Quotes

    “We have core inflation not exceeding 1.3% at the 2018 horizon on the back of slow closure of the output gap and slow reforms in non-tradeable sectors. We also assume a weaker euro in 2016 and 2017, followed by a gradual appreciation until 2020 and a noticeable recovery in Brent in euro terms. As a result, inflation should recover to 0.6% in 2016 and average 1.5% between 2017 and 2020.

    ECB in easing mode: Annual inflation is likely to remain below the ECB target (‘below but close to 2%’). Therefore, we believe that the ECB will continue to act. In particular, we expect the ECB to cut the deposit rate again by 10bp in March, and we see QE extended beyond March 2017.”
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