In late 2015, Euro inflation will increase sharply.



The sharp increase at the end of the year is due to higher energy price inflation supported by strong base effects. Core inflation is also expected to go slightly higher but the jump is mainly driven by higher energy price inflation.



"Headline inflation is expected to hover around the current level of 0.2-0.3% y/y in Q3 but during Q4 it is expected to increase from 0.5% in October to 1.2% in December after which it should reach 1.7% in January", says Danske Bank.



Despite energy price inflation having a weight of around 10% of headline inflation, it accounts for more than 50% of the historical absolute monthly variation in annual inflation.



"Overall, Average headline inflation is expected to be 0.2% in 2015 increasing to 1.4% in 2016 revised slightly lower from 0.3% and 1.5%, respectively", added Danske bank.