Eurozone inflation drops for first time in 17 months

FRANKFURT – Eurozone inflation eased for the first time in 17 months, well below expectations, providing some much-needed relief for the region’s consumers and businesses and reducing the prospect of another huge interest rate hike.

according to Eurostat data free On Wednesday, inflation slowed to 10.0 percent in November from a record 10.6 percent in October. That fell well short of the 10.4 percent average forecast in a Reuters poll of analysts.

Nicola Nobel, economist at Oxford Economics, said, “While inflation should remain elevated, the fact that energy is poised to become more disinflationary means that inflation will ease gradually for the eurozone after today’s data.” “

The decline in headline inflation this month was mainly due to lower energy price inflation, which eased to 34.9 per cent from 41.5 per cent in October. Rising energy prices still remain a major driver behind the current high inflation.

So-called core inflation, which strips out the volatile components of energy, food, alcohol and tobacco — and is considered a bellwether for underlying inflation trends — remained unchanged at 5.0 percent.

Commerzbank economist Christoph Weil said it was too early to say with any confidence that the worst had passed, pointing to strong underlying price pressures and “extreme volatility in energy prices”.

European Central Bank President Christine Lagarde said earlier this week that she would be “surprised” if eurozone inflation has peaked because the previous jump in wholesale energy prices has yet to be fully passed on to consumers. Many households may see a change in their gas price only at the beginning of the gas year.

With core inflation still running at more than double the ECB’s 2 per cent inflation target, hawks on the governing council warned there was no reason to rejoice and, as executive board member Isabelle Schnabel said last week, slowing There is only limited room to do the pace of rate hikes.

Complicating matters further, inflation levels across the region continue to show an extraordinary level of divergence. Latvia has the highest inflation rate in the Baltics with 21.7 percent inflation. The lowest level, 6.6 percent, was recorded in Spain.

Nevertheless, inflation coming below expectations, along with the first signs that global inflation is coming down, will back the case for pigeons on the ECB’s Governing Council who have argued that it is time to move away from large interest rate hikes. Is. Both Nobile and Weil said today’s reading raises the possibility that the Governing Council will opt for a 50 basis-point rather than 75 basis-point hike in December.

“Temporary signs of inflation peaking are increasing, evidence of a wage-price spiral remains absent and the environment is turning bearish,” said ING economist Carsten Brzeski. “In our view, a smaller increase of 50 basis points is more likely than an ECB hike of 75 basis points in December.”

This article has been updated.