Simon Junker, analyst at Commerzbank, expects Eurozone inflation to stay negative for the coming few months, but expects a reversal in the autumn. The core rate could still ease until the end of the next year, but without crossing zero, the analyst said.
The reason behind the annual fall continue to be energy prices, which have fallen around 14% since last July. This special effect would gradually drop and inflation would then pick up again. The analyst sees inflation rate of 1.6% for 2010 compared to 0.5% this year.
Junker holds the view that the medium term inflation trend is in line with the ECB target. Besides, easing core inflation is another argument for low interest rates. The ECB should therefore retain its expansionary course of monetary policy for time to come, he said.
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