Euro Area's inflation rate likely to rise in Q4

At the ECB's September meeting, "heightened uncertainties related to the external environment" provided the background for Mario Draghi's dovish tone. 

Since then, long-term EUR bond yields have fallen, the nominal effective value of the EUR is slightly higher, while equity prices are close to unchanged. All in all, monetary conditions have not changed much.

On the economic side, nothing points to a sharp deceleration of growth in the Euro area. PMIs are still on a level compatible with ongoing quarterly growth around 0.4% q/q which is above trend. Low inflation is a greater headache for a central bank committed to a 2% headline inflation target. 

"Headline inflation fell to -0.1% y/y which is about 0.2 percentage points lower than the ECB staff expected in the latest projection. Inflation expectations are below target, but should rise on the back of an inflation rate that will rise in Q4 driven by base effects", says Nordea Bank.