Financial Associated Press, January 6 (Editor Zhao Hao) The inflation rate in the euro zone fell for the second consecutive month, but the year-on-year growth rate is still high. Analysts do not expect to change the “hawkish” tone of the European Central Bank.
The specific data released by Eurostat shows that the initial value of the consumer price index (CPI) in the euro zone in December 2022 fell by 0.3% month-on-month, which was higher than the market’s expected 0.1% drop. The data recorded a drop of 0.1% in November.
This made the year-on-year increase in CPI slow down to 9.2% from 10.1% in November, a decline of 0.9 percentage points and lower than the expected value of 9.7%. It is worth mentioning that this is also the first time that the annual CPI rate in the euro zone has returned below 10% after two months, and it is also the first time since June 2021 that it has slowed down.
In terms of sub-item data, energy prices increased by 25.7% year-on-year, but it was 9 percentage points lower than November’s 34.9%; food, alcohol and tobacco prices rose by 13.8% year-on-year, a slight increase of 0.2 percentage points from November; services The year-on-year increase in prices was 4.4%, which was also a slight increase of 0.2 percentage points.
The core CPI excluding energy and unprocessed food rose by 0.7% month-on-month, stronger than November’s 0.3%; the year-on-year increase reached 6.9%, 0.3 percentage points higher than the previous month’s 6.6%.
In terms of countries, the year-on-year inflation rates of Latvia and Lithuania exceeded 20%, ranking the top two in the euro zone; Spain’s inflation rate recorded 5.6%, the lowest in the euro zone; Germany, France and Italy, the largest economies, were 9.6% respectively %, 6.7% and 12.3%.
‘Not enough to count on ECB to turn dovish’
Carsten Brzeski, global head of macro at ING Germany, said the figures were not yet a relief, but a reminder that inflation in the euro zone was still largely an energy price phenomenon.
Since the escalation of the conflict between Russia and Ukraine in February last year, the European Union has followed the United States in imposing multiple rounds of sanctions against Russia, causing energy and food costs in the region to soar. To combat soaring prices, the ECB raised interest rates to 2 percent four times last year and said it would continue to do so this year.
Analysis believes that although there are further signs that inflation in the euro zone is easing, it is too early to celebrate, because the current price level is not enough to count on the European Central Bank to have a turning point.
The financial website Forexlive commented that this proves that the ECB is right to continue on a more hawkish path.
Hetal Mehta, senior European economist at Legal & General Investment Management, said the ECB’s interest rate will hit 3 percent and will likely need to remain at that level throughout the year.
ECB President Christine Lagarde has also repeatedly stated that the bank has not turned yet and that there is “more to do”. Previously, the ECB predicted an average inflation rate of 8.4% in 2022, 6.3% in 2023, and 3.4% in 2024, all higher than the central bank’s 2% inflation target.
Claus Vistesen, chief euro zone economist at Pantheon Macroeconomics, also said in a note this week that he sees “little relief” from the inflation data and that the ECB will remain on guard “at the start of the year”.
Vistesen expects the bank to raise rates twice in the first quarter, each by 50 basis points.
Editor in charge: Li Tong
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