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EUR Inflation Watch: A dovish surprise in the making

We see between 0.20-0.25%-points lower inflation in the Euro area than the consensus and the first evidence is already gathering in Germany. Expect EUR inflation to be below target by March-2024 at the very latest.
2023-10-27

Good afternoon from Europe

We received the first inflation evidence from the Euro area already earlier today as the German regional office in Brandenburg released the preliminary October numbers printing at 0.0% MoM.

That is a very soft reading, fitting hand in glove with our dovish EUR-flation view, and it looks favorable both in unadjusted and seasonally adjusted terms. A reasonable expectation (based on seasonal patterns + trend) would be to expect a 0.2-0.3% MoM print in Brandenburg for October, so it strengthens our case for a material dovish surprise.

Chart 1: Brandenburg fuels the dovish CPI case in Europe

We see between 0.20-0.25%-points lower inflation in the Euro area than the consensus and the first evidence is already gathering in Germany. Expect EUR inflation to be below target by March-2024 at the very latest.

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