Eurozone inflation data should give ECB 'ammunition' to end cutting cycle

Tuesday’s Euro Area inflation figures should provide the ECB with further ammunition to end its cutting cycle.

The main inflation measure unexpectedly remained unchanged at 2.3% in August according to the preliminary figures (2.2% estimate), while the core number ticked up to 2.1% (from 2.0%).

The Governing Council will be convening next week, and markets are assigning no chance of another cut. While it may be too soon for the ECB to definitively signal to markets that it is done with easing, it will also probably hint at a prolonged pause ahead.

Before then, market participants will have a handful of domestic economic figures to digest, including revised PMI and GDP figures, and the July retail sales report.

In our view, it remains far too soon for the data to reflect the injection of German fiscal stimulus (this is unlikely to be seen until 2026), although we may soon begin to see evidence of how the striking of the US-EU trade deal is affecting the real economy.