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EUR Inflation Watch – The ECB forecast is OFF by >1.5%-points for Q1

The early evidence from Germany, Spain and Portugal suggests that we will get another (material) dovish surprise from EUR inflation this month. The ECB forecast for Q1 is miles OFF.
2024-01-03

The smallest German state, Saarland, sneaked out its preliminary December inflation this morning and it was another soft surprise.

Saarland CPI increased a tad less than 0.1% on the month, which is below 0.2% in seasonally adjusted terms. This is if anything a SOFT print relative to consensus expectations and as Saarland CPI explains 78% of the variability in the nationwide German CPI, it leaves a 0.1% MoM inflation print most likely for the German CPI. 

That is BELOW consensus (and our best guess as well) but rhymes well with our overall very dovish forecast for European inflation this month.

Chart 1: Saarland CPI hints of a soft German surprise

The early evidence from Germany, Spain and Portugal suggests that we will get another (material) dovish surprise from EUR inflation this month. The ECB forecast for Q1 is miles OFF.

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