01.11.201301:37:00UTC+00Research: ECB Staff Likely to Cut Its Inflation Forecast for 2014

Quotes from Societe Generale Cross Asset Research:

-Flash euro HICP fell sharply to 0.7% yoy in October, down from 1.1% yoy in September. This is the lowest reading since Nov 2009 and raises the likelihood of further policy easing by the ECB. As a consequence, we expect ECB staff to cut its inflation forecast for 2014 (currently at 1.3%) further, at least by a few tenths.

-However, it is not sure whether such a downward revision alone will be sufficient to trigger a rate cut. Some factors might prove temporary (such as the absence of any observed VAT impact in Italy in October). Also the ECB would probably like to have a broader picture of the global macroeconomic situation, including the growth outlook (Q3 numbers will be released mid-November).

-No doubt that price developments will be the key topic during the November 7 ECB press conference. Other hard data (consumption in Germany and France, Italian labour market) point to a weak growth in Q3 in the euro area (SG 0.1% qoq).