In case the ECB needed a bit more evidence to support the case for the rollout of an aggressive easing package next month, euro-area July inflation was revised lower on Monday.
In the second revision, the headline print moved down a notch to 1% YoY from the 1.1% reported at the end of last month. Earlier, the ECB’s Muller echoed Olli Rehn in suggesting the September meeting will bring a rate cut and, quite possibly, the restart of net asset purchases.
“The euro area’s 1.1% inflation clearly trails [our] target”, Muller told Estonian public broadcaster ERR. “This may mean that the central bank will have to add stimulus”. Well, now it trails the target by another tenth.
This comes a week after data showed the German economy contracting in the second quarter and amid a broad deceleration in growth across Europe.
PMIs out this week are likely to underscore the factory malaise and market participants will be watching closely for signs of spill over to the services sector.
Reports that Germany is prepping a “contingency plan” in the event the world’s fourth-largest economy succumbs to a deep recession bolstered the outlook for risk assets on Monday, but skeptics fret that Berlin’s reactive approach will be too little, too late.
Minutes from the ECB’s July meeting are due later this week.
Read more: German Stimulus Rumor Mill Kicks Into High Gear With Recession ‘Contingency Plan’ Report
