Markets are tracking the latest inflation data from the Eurozone ahead of another ECB meeting.
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Inflation in the euro zone eased slightly in November, preliminary figures showed on Wednesday, as prices hit record highs and missed analysts’ expectations.
Consumer prices have been hitting highs in the 19-member region for several months. Inflation topped the 10% mark last month, underscoring the severity of the bloc’s cost of living crisis.
Early data released by the European statistics office on Wednesday showed headline inflation at 10% a year this month, down 0.6 percentage points from October.
Energy and food continued to contribute to the high inflation figures, but with a noticeable drop in the former. Energy is expected to settle at an annual rate of 34.9% in November, against 41.5% in October, according to Eurostat.
“The fall in headline HICP inflation from 10.6% in October to 10.0% in November was the first drop since June 2021 and was a bigger drop than originally expected,” said Andrew Kenningham. , chief economist for Europe at Capital Economics in a note.
“We wouldn’t be surprised to see the headline inflation rate rise again in December or January given the volatility of the monthly numbers, but there’s no doubt that it will fall rapidly next year,” he said. he added.
The slowdown in inflation comes after a similar set of data from the United States. Earlier this month, October’s consumer price index came in below expectations.
Earlier this month, an ECB member told CNBC that peak inflation was “within reach.” Edward Scicluna, who is also Governor of the Bank of Malta, told CNBC exclusively that as a result he did not see a repeat of the previous 75 basis point rate hike.
Market expectations point to a 50 basis point rate hike in December.
Lower inflation numbers could be a reflection of recent interest rate increases and could mean lower or smaller rate hikes in the coming months. However, speaking earlier this week, the ECB President Lagarde provided for further changes to its reference rate.
“We expect to raise rates further to the levels needed to ensure that inflation returns to our medium-term target of 2% in due course,” she told EU lawmakers.
The central bank has raised rates three times this year and is expected to do so again in December. However, there is huge uncertainty about the number of rate hikes announced by the ECB next year.
Some economists say officials will need to pause to allow the real economy to react to the higher rates, while others believe inflation is at such high levels it needs further rate moves .
The ECB estimated in September that annual headline inflation would reach 8.1% for 2022 and 5.5% in 2023. These figures are expected to be revised upwards at the central bank’s meeting in December.