We expect inflation in the Eurozone to reach a peak of around 2017% in the first quarter of 1,5, driven by increases in energy. Overall, however, core inflation should not rise significantly above 1%.
These are the conclusions of the latest Standard & Poor's report on inflation in Europe (“Is inflation back in the Eurozone?”). The American agency focuses on the impact of the rise in oil prices, which rose by 40% between December 2015 and December 2016, a rise which was 45% if valued in euros and 70% if in British pounds, considering that the US dollar it gained 3 and 20 per cent respectively against the two eurozone currencies.
According to S&P, the recovery in inflation puts the ECB in a difficult position as the central bank will keep pressures at bay for a rate hike claimed by the most rigorous European politicians and at the same time will have to prevent any monetary tightening not supported by conditions of sufficient guarantee.
For these reasons, concludes S&P, the ECB's monetary policy will likely remain unchanged until the inflation adjustment path consolidates, and therefore probably not before 2018.
