Euro area – May CPI likely ticked up to 0.1% y/y

The May euro-area CPI inflation rate release, due on Tuesday, is likely to have accelerated to 0.1% y/y from 0.0% prior. Core CPI likely remained unchanged at 0.6% y/y, says Standard Chartered. Headline CPI moved out of negative territory in April after four months. Although European Central Bank easing policies might have had a limited effect, the two factors likely contributing to this inflation pick-up are the recent sharp oil-price rise, and euro depreciation in the past year. 

The oil price in euro terms has risen about 50% since the trough in January. Core CPI to begin accelerating around three months after headline CPI due to the lagged effect of low energy prices on non-energy goods, adds Standard Chartered. In the medium term, a sustained period of above-trend growth is needed to shrink the spare capacity in the euro-area labour market.