Flash: Chances of generalized deflation in Eurozone remote – Goldman Sachs

FXstreet.com (New York) - April’s headline inflation outturn in the Euro area (1.2%pa) surprised to the downside, raising concerns in some quarters that a deflationary dynamic – akin to that seen in Japan over much of the past two decades – was emerging in continental Europe, suggests the Economics Research Team at Goldman Sachs.

Subsequent slightly higher inflation outturns (June 1.6%pa) have assuaged some of these concerns. However, “these very short-term developments in inflation are a poor guide to the more persistent trends in the price level that are of relevance for macroeconomic developments (and thereby the setting of monetary policy). Nevertheless, the current weakness of the real economy in the Euro area as a whole augurs for continuing disinflationary pressure.”