EUROPEAN INFLATION: Core Momentum Highest Since May But Services Drivers Unclear

Eurozone core inflation momentum firmed in October to its highest rate since May according to this afternoon's ECB seasonally adjusted data. Some of the services strength behind it may be caveated by coming from volatile travel related categories (implied by previously released country-level NSA data), but we can't say for sure how much of the rise came from more persistent categories. Strength coming from the latter would encourage the more hawkish cohort of the ECB Governing Council who have clearly advocated against a renewed rate cut to 1.75%. ECB-dated OIS only has 1bp of cuts priced for the December meeting although some recent sources pieces have entertained a closer decision than that would imply. 

• Core inflation momentum accelerated to 2.66% in October after 2.31% in September and the highest since May, calculated here as a 3m/3m annualised rate using ECB seasonally adjusted data. This brings the YTD average in the series to 2.40%.
• On a sequential basis, core prices rose 0.26% M/M vs 0.18% in Sep and 0.22% in Aug.
• Services inflation momentum was the driver here, increasing to 3.61% (vs 2.90% in September), the highest rate since June.
• It came with monthly services inflation of 0.39% M/M after 0.24% in Sep and 0.33% in Aug.
• Core goods momentum meanwhile gave back a little of its recent acceleration, easing to 0.93% vs a downward revised 1.33% in Sep (previously shown at 1.45%) and 1.0% in Aug. It points to less upside risk to the 0.6% Y/Y printed earlier today in the NSA data than implied last month.
• Core goods prices fell -0.05% M/M after 0.06% in Sept for technically the first decline since April.