The April euro-area CPI flash release , due on Thursday, is expected to stay at -0.1% y/y. However, core CPI is likely to have eased again to 0.5% y/y. The 50% increase in the Brent crude oil price in euro (EUR) terms since January means the monthly inflation trend is upwards, but the EUR oil price is still 25% cheaper than one year ago. The headline CPI will bottom soon and begin an uptrend. Core CPI has still has some room to go before bottoming due to the lagged effects of the low oil price on non-energy-related goods and services. Spare capacity in the euro area remains sizable and a few years of above-trend growth are needed to eliminate it. Signs of solid wage growth in Germany indicate spare capacity is being eliminated, but such signs have not yet appeared in the weaker countries
The material has been provided by InstaForex Company – www.instaforex.com