Inflation expected to rise again in the latter part of this year – ECB accounts

• But inflation is then expected to decline towards target over the second half of next year
• Too early to declare victory against inflation
• Core inflation and services inflation might be stickier and not decline as much as expected
• But disinflationary process remains on track
• The risk of delays in reaching the target warrants some caution against dialing back policy restriction prematurely
• Need to carefully monitor whether inflation would settle sustainably at target in a timely manner
• Full accounts

There’s nothing in there that is out of the ordinary. The thing is that since last month’s meeting, recent data has pushed markets to expect another rate cut by the ECB for next week. That is the bigger development in play currently. A 25 bps rate cut is now ~94% priced in based on the rates market.

This article was written by Justin Low at www.forexlive.com.