Commenting on the Eurozone CPI data, Commerzbank analyst, Christoph Weil said the inflation rate will continue to rise sharply in the coming few months. Further, the oil market bubble burst will trigger a slump in oil prices of around 70% between July 2008 and the start of 2009.
Inflation will reach 1% again towards the end of the year. High surplus capacities limit companies' pricing scope, while the notable rise in unemployment will curb pay momentum. Commerzbank forecasts a core inflation rate of 0.5% in the autumn of 2010.
These factors give the ECB ample room to delay its monetary policy reversal for a while longer. Weil sees no rate hike in the current year despite the emerging strong growth in the second half of 2009.
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