Analysts at Danske Bank, expect Eurozone inflation to reach 1.6% in May before falling back to 1.4-1.5% at the end of the year.

Key Quotes:

“After increasing to 1.3% y/y in March, headline inflation declined to 1.2% y/y in April. We expect a large increase to 1.6% in May, driven largely by energy price inflation. We expect headline inflation to remain at this level temporarily, before falling back down to around 1.4-1.5% at the end of the year.”

“The ECB should not yet conclude that we are seeing a sustained convergence of headline inflation towards 2% as the expected increase should be temporary. Core inflation declined to 0.7% y/y in April as a consequence of the timing of Easter, and we expect a bounce back to 1.0% y/y in May.”

“We expect core inflation to remain subdued throughout 2018, and remain around the 1.0-1.1% level. Note that German inflation is due for release on Wednesday afternoon, in advance of the euro area figure.”