Markets follow the latest inflation data from the euro zone ahead of a new ECB meeting.
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Inflation in the euro zone slowed slightly in November, according to preliminary figures released on Wednesday, with prices coming off record highs and below analysts’ expectations.
Consumer prices have been through the roof in the 19-member region for several months. Inflation topped the 10% mark last month, highlighting the severity of the bloc’s cost-of-living crisis.
Initial data on Wednesday from Europe’s statistics office 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 notable drop in the former. Energy is expected to have stood at an annual rate of 34.9% in November, compared to 41.5% in October, according to Eurostat.
“The drop in headline HICP inflation from 10.6% in October to 10.0% in November was the first drop since June 2021 and was a larger drop than originally expected,” it said in a note. Andrew Kenningham, chief European economist at Capital Economics.
“We wouldn’t be surprised if the headline inflation rate picked up again in December or January given the volatility of the monthly numbers, but there is little doubt that it will fall rapidly next year,” he added.
the euro fell slightly against him british poundtrading at £0.863, and was up around 0.4 percentage points against the American dollar to $1,037 shortly after the figures were released.
The decline in inflation comes after a similar set of data from the United States. Earlier this month, the October 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 the governor of the Bank of Malta, told CNBC exclusively that he did not see a repeat of the previous 75 basis point rate hike as a result.
Market expectations point to a 50 basis point increase in rates in December.
The lower inflation figures could be a reflection of recent interest rate increases and could mean smaller or smaller rate increases in the coming months. However, speaking earlier this week, the ECB lagarde president forecast more changes to its benchmark rate.
“We expect to raise rates further to the levels necessary to ensure that inflation returns to our medium-term target of 2% in a timely manner,” he told European lawmakers.
the central bank it has raised rates three times this year and is expected to do so again in December. However, there is great uncertainty about how many rate hikes the ECB will announce next year.
Some economists argue that officials will need to take a break to allow the real economy to react to the higher rates, while others believe inflation is at such high levels that more rate changes are needed.
The ECB estimated in September that annual headline inflation will reach 8.1% by 2022 and 5.5% in 2023. These figures are expected to be revised upwards when the central bank meets in December.
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