Decline in euro area HICP inflation confirmed
     
     
     Euro area headline HICP inflation (October)
     
     Actual             2.4%
     UBSW               2.4%
     Consensus          2.4%
     Previous           2.5%
     
     
     Euro area core HICP inflation (October)
     
     Actual             2.3%
     UBSW               2.3%
     Consensus          2.2%
     Previous           2.2%
     
     
     Bottom line: Euro area headline inflation decelerated as expected to 
     2.4% in October from 2.5% due to energy prices. This is in line with 
     consensus expectations and the "flash" estimate published by Eurostat 
     earlier in the month. Euro area core inflation (CPI less all food and 
     energy) accelerated to 2.3% in October from 2.2% in September. This 
     was above initial consensus estimates of 2.2% but probably widely 
     expected following preliminary French and German national CPI data 
     which indicated higher core inflation. 
     
     The rise in core inflation is clearly an issue for the ECB but we 
     would expect them to play down the acceleration in core inflation and 
     focus instead on the fall in headline inflation. Headline inflation 
     was 2.0% or below in 4 economies in October, up from 3 in September. 
     The ECB expects headline inflation to decelerate sharply during early 
     2002 - the recent declines in oil prices, if sustained, are likely to 
     add to that sentiment.  We expect slower growth leading to lower 
     pipeline inflation pressures along with base effects to generate firm 
     expectations of a marked decline in inflation during 2002. This 
     underpins our expectation of a further 50bp of policy rate cuts from 
     the ECB in Q1 2002.