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Euro area headline inflation affirms flash estimate of 2.2 pct in October

Euro area headline inflation affirmed the flash estimates in October. Details indicated higher super core inflation; however from still weak momentum. The headline consumer price inflation came in at 2.2 percent on a year-on-year basis in October. The core rate came in at 1.1 percent, affirming the flash estimate.

Supercore inflation, which only includes those core prices that are sensitive to the business cycle and make up the approximate half of the core prices – rose to 1.5 percent year-on-year in October from 1.2 percent year-on-year in September.

The rise in because of base effects from the lowering of Italian education prices one year ago as well as package holiday prices. In terms of momentum, supercore accelerated on the month in October, but has eased in the past three months. Momentum is still subdued, but the trend is up.

Services prices rebounded in all four big euro area nations, while the softness in October was driven by non-energy industrial goods, in particular in France.

“We continue to see upward pressures to supercore in the coming quarters as higher wage growth passes through to higher prices, especially to services prices and mostly in France and Italy. The rest of core inflation will remain low and hence overall core inflation will increase only gradually”, stated Nordea Bank in a research report.

However, the subdued core inflation figures and recent fall in oil price signify that the revisions to the ECB’s inflation expectations in December are going to be negative.

“We stick with 1.1 percent y/y as the preliminary forecast for core inflation in November”, added Nordea Bank.

At 13:00 GMT the FxWirePro's Hourly Strength Index of Euro was neutral at 33.9358, while the FxWirePro's Hourly Strength Index of US Dollar was bearish at -91.4363. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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