Lower inflation outlook may insist ECB to cut deposit rate

The HICP inflation in euro area surprisingly remained steady at 0.1% y/yin November. Whereas, core inflation fell to 0.9% y/y during the same month against 1.1% in October. Markets were expecting the HICP inflation to increase to 0.2% y/y and core figure to remain steady at 1.1%.

The major components of core inflation, non-energy industrial goods and service price inflation reduced to 0.5% y/y and 1.1% respectively. The inflation figures of the euro area indicate the ECB may lower its inflation outlook at the today's meeting.

At the time of lower core inflation outlook, the ECB is expected to cut its deposit rate by 20bp and it may continue the purchases till December 2016, says Danske Bank.