FXStreet notes that Euro-area inflation came in at 0.1% y/y in May, down from 0.3% last month, while core inflation stood unchanged. The outlook is more uncertain further out, but analysts at Nordea see mostly downside risks to inflation in the coming years.

“Headline inflation in the Euro area continued down to 0.1% y/y in May according to the flash estimate. Energy prices continue to pull heavily on the headline, as it dropped 12% y/y, while unprocessed food prices were 6.5% higher. Core inflation stood unchanged at 0.9% y/y, surprisingly.” 

“Headline inflation in Germany as measured by the preliminary HICP was 0.5% y/y in May, in line with expectations and down from last month’s 0.8%. Consumer prices in France came in with HICP at 0.2% y/y. In Spain, inflation dipped even further below zero than last month, reporting HICP at -0.9% y/y. Italian prices also dropped compared to last year, with preliminary inflation at -0.1% y/y.”

“Our forecast is for very low headline inflation this year and next year, at 0.0% and 0.5% y/y respectively. For Italy and Spain, we see a negative outcome this year.”