Assumption that oil prices
The above is based on the assumption that oil prices (a key driver of household
energy and fuel inflation) will inch up only moderately in the forecast period (in
USD terms). Led by the strengthening euro, the small uptick should be further
alleviated.
At present, we expect oil prices (Brent) in 2018 to rise to around USD 55 per
barrel (annual average, up from c. USD 53 in 2017; +3.1% yoy). In 2019,
another slight acceleration ought to be on the cards (to roughly USD 56 per
barrel, +2.8%). Along with the more or less neural price-dampening effect from
the energy side, the contribution of food prices could also shrink somewhat next
year, down from a relatively high level in 2017.
From our perspective, 2018 and 2019 will be dominated by wage and core
inflation. After declining (moderately) to 1.6% in 2018 (from 1.7% in 2017),
(headline) inflation looks set to rise to around 1.8% in 2019 (see chart 43). It
should be noted though that inflation could be very close to the 2% target in the
forecast period, if oil prices rose more rapidly than expected (for example, to
USD 66 in 2018 and USD 73 in 2019;.
EU Forecast
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