Euro inflation increased to 0.7% in April. Hence, it has stayed far below the ECB's target. Inflation undershot the ECB's projection and we expect it to lower its forecast in June. Governor Draghi recently said 'there is consensus about being dissatisfied with the projected path of inflation' and we expect more easing, see ECB promises to cut in June , 8 May 2014.
In the coming months, we forecast inflation to stay around current levels, but in Q4 14 we expect an increase to around 1%. This should partly follow as higher global food prices put upward pressure on food consumer prices. We continue to forecast average inflation at 0.7% in 2014, but we have revised our projection for 2015 slightly up to 1.1%.
In Danske Bank's (COP:DANSKE) Euro Area Deflation Index, all countries are placed at or below zero, but the overall euro index has moved up to -5 from -6. Germany has moved up in the index, but France and the Netherlands are still placed among the periphery countries.
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