The CPI inflation in the Eurozone in November increased to 2.3% year-on-year, thus slightly moving away from the inflation target of 2%. In the previous month, the rate was exactly 2% year-on-year. However, the observed increase is consistent with market consensus. Core inflation remained at 2.7% year-on-year.
The observed increase in inflation may argue for a more cautious approach to interest rate cuts. We particularly observe the dynamics of service prices, which remain elevated and amounted to 3.9% year-on-year.
Currently, the market predicts a cut of 25 basis points in December, and a cut of even 50 basis points is in play and could be justified by the observed weakening of economies, as indicated by GDP readings and PMI indicators, among others. However, so far, the ECB has been cautious and rather slow in its decisions, so it seems that this time it will end with a move of 25 basis points.
Author: Bartosz Wałecki, Analyst, Trader Michael / Ström Brokerage House
Source: https://ceo.com.pl/inflacja-w-strefie-euro-wzrosla-do-23-wyzszy-poziom-inflacji-moze-oznaczac-ostroznosc-w-obnizkach-stop-11803
