The Eurozone inflation rate rebounded by half a percentage point or gave justification for the European Bank to maintain high interest rates
Financial News Agency, January 5 (Editor Zhao Hao)As many European countries reduce support for energy costs, euro zone inflation rose significantly last month, reflecting that the road back to the ECB’s 2% target will not be smooth sailing.
Preliminary data released by Eurostat shows that the Eurozone inflation rate – the Harmonized Index of Consumer Prices (HICP) increased by 0.2% month on month in December 2023, in line with market expectations This indicator decreased by 0.6% in November.
On an annual basis, the preliminary Eurozone HICP value in December increased by 2.9% year-on-year, slightly below the 3% expected by the market, but rebounded by 0.5 percentage points from the final value of 2.4% in November , ending the downward trend for consecutive months.
The data also showed that in December, food, tobacco and alcohol prices in the euro area increased by 6.1% year on year, non-energy industrial product prices increased by 2.5%, respectively lower than the 6.9% and 2.9% in November, and service prices increased by 4%, compared to the previous month Consistently, energy prices fell by 6.7% year on year, less than the 11.5% drop last month.
An analysis of the media indicated that the primary effect in Germany was mainly responsible for the reduction in energy. The German government made a one-time monthly prepayment for gas and private household heating in December 2022, which had a dampening effect on the overall index that month.
Recently, many European officials have stated that, although euro zone inflation has slowed significantly in recent months, reaching the 2% target remains a challenge. Progress this year may be slower than expected due to statistical influences and reductions in subsidies from some countries.
After the release of inflation data, the market became more cautious on bets on the European Central Bank to cut interest rates during the year Money markets currently expect a cumulative 145 basis points of interest rate cuts in 2024, which was close to 175 basis points last week.
Two weeks ago, ECB Executive Board member Isabel Schnabel told German media that euro zone inflation could rise “temporarily” before slowing down “gradually” to the 2% target in 2025. “We are still have a long way to go and we will see how difficult the famous ‘last mile’ can be.”
Last week, Robert Holzmann, the Governing Council of the European Central Bank and President of the Austrian Central Bank, said that it was too early to talk about lowering borrowing costs, and that there was no guarantee that interest rates would be cut in 2024.
Holzman also emphasized that “the normalization of monetary policy has indeed had an impact on inflation, but it is too early to consider cutting interest rates now.”
#Eurozone #inflation #rate #rebounds #percentage #point #justifies #European #Bank #maintain #high #interest #rates #Financial #Press
