Beware of disinflation in the euro zone

Core inflation is more or less stable in the euro zone , as the slight acceleration in unit labour costs is not passed on to companies’ selling prices because of the intensity of internal and external competition. Furthermore, the oil price is falling due to the surge in US shale oil production in 20 18; the oil price is likely to pick up in 2019 as a result of the rebalancing of the oil market, but remain s markedly lower than in the first quarter of 2018. Overall , euro-zone inflation should fall below core inflation from February to November 2019 , i.e. become very low (0.6% at the lowest). This will lead to: Support of real wages and household demand; Due to second-round effects, a slowdown in nominal wages and a decline in core inflation; And, as a result, another reason for the ECB to not normalise its interest rates.