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Euro area inflation bounce unlikely to prevent further stimulus

The initial reading for January euro area annual inflation is forecast to see a second successive monthly rise. While oil prices fell in January, they dropped by even more at the same point last year. That should allow the headline rate to move up to 0.4% (from 0.2%), still well below the ECB's inflation target.

The core rate is expected to be unchanged at 0.9%. Such an outturn is unlikely to reduce the odds of the ECB introducing further stimulus measures potentially as early as its next meeting in March.

"The ECB would have been expecting an even larger pickup in January inflation before the latest oil price fall. It will also be aware that inflation could start to decline once again over the next few months unless the oil price rebounds", notes Lloyds Bank.

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