Euro area core HICP inflation was revised even lower, to 0.37% YoY in august, a record low.
A few charts illustrating the underlying trend in consumer prices, with the usual caveat that covid-19 and temporary factors (German VAT cut; summer sales) are adding a lot of noise. (1/n)
There's a long list of temporary drags on core inflation indeed. The @ecb can try and look through them for as long as possible. But there's no escaping the early disinflationary effects of the crisis, even before labour market scars become a problem. (2/n)
For all the noise in the data, most gauges of underlying inflation are trending down, in some cases very sharply. Momentum, trimmed means, volatility weighted measures all down to multi-year lows. (3/n)
Super core inflation is also trending down, although composition matters even more than usual and more data will be needed to get a cleaner picture. (4/n)
The biggest caveat is the German VAT cut.
Euro area core HICP at constant tax rate was still 1% in August (assuming 100% pass-through). The ECB may continue to pin their hopes on a reversal next year, but the risk is that inflation expectations can't wait that long. (5/5)
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