Inflation in the euro-zone is only 0.1% y/y. Core inflation stands at 0.9%. Both figures are 0.1% below expectations and below the preliminary reads, as prices remain subdued. Month over month, headline prices remained unchanged as expected. Has the case for more QE been given a boost?
EUR/USD slips to a new low of 1.1235 after the release. This is not a major reaction, but an extension of the previous move.
The final numbers for August were expected to show a y/y rise of 0.2% in headline CPI, as in the preliminary release and a rise of 1% in core CPI, also confirming the previous number.
EUR/USD was pressured lower, most notably due to the ongoing talk about more QE. Lower inflation strengthens the case for more bond buying, while higher inflation weakens it.
Headline inflation is low due to falling oil prices, but the core numbers already reflect a lack of demand – the weakness of the economies across the old continent.
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