On December 29, 2024, a man drives a bike on a snowy road after the snowfall in Frankfurt am Main, West Germany.
Kirill Kudryavtsev | AFP | Getty Images
The annual inflation rate in the euro zone rose the third month in a row and reached 2.4 %in December, the Statistics Authority reported Eurostat on Tuesday.
The preliminary value corresponded to the forecast of the economists surveyed by Reuters and marked an increase compared to a revised value of 2.2 % in November. The core inflation remained 2.7 % for the fourth month in a row and thus also corresponded to the expectations of the economists, while inflation in the service sector increase from 3.9 % to 4 %.
It was generally expected that the overall inflation would accelerate after it had reached a low of 1.7 % in September, since the basic effects of lower energy prices subside. The full extent of the increase in the measured value – together with the continued existence of services and core inflation – is observed by the European Central Bank, from which the markets currently expect to reduce interest rates this year in several steps from 3 % to 2 % becomes.
The pace of price increase in the largest economy in the euro zone, Germany, achieved an unexpectedly high value of 2.8 %in December, as can be seen from separately published figures this week. Inflation in France, meanwhile, was 1.8 % last month and was therefore under an analyst survey by Reuters, which predicted a value of 1.9 %.
The euro After the publication, the US dollar recorded price gains in the early morning compared to the US dollar and was traded at $ 1.0424 in London at 10:43 a.m. in London. Dealers check whether the euro could fall with the Greenback this year if the US Federal Reserve shows itself significantly more restrictively than the ECB.
Haig Bathgate, director of Callanish Capital, told the CNBC program “Squawk Box Europe” that the ECB politicians would not be excessive about a higher monthly inflation value, as long as the expectations were largely appropriate.
“In many data series that we see, the predictability is now much greater … The direction in which the interest rates are developing.” [lower] “In Europe, it is much more predictable than, for example, in Great Britain,” said Bathgate on Tuesday.
While the markets preferred the prices for interest reductions at the beginning of the year, Jack Allen-Reynolds, deputy chief economist for the euro zone at Capital Economics, said that the toughness of service inflation means that the ECB will probably only reduce interest rates, if only Slowly. ”Since the economic prospects are still bad.
“The most important thing for the monetary policy prospects is that the core inflation unchanged for the fourth month in a row was 2.7 % … This will not prevent the ECB from further reducing interest rates,” said Allen-Reynolds in a note.
“The high inflation in the service sector is partly due to temporary effects that should relieve this year. Meanwhile, the job market has relaxed, wage growth slows down and the growth prospects are weak. ”
The economy of the euro zone grew by 0.4 %in the third quarter, but economists warn that political instability, persistent weakness in the processing trade and the possibility of escalating the trade voltages under the new government of the designated US President Donald Trump the view for 2025 have clouded.
Correction: This article has been updated to take into account that the German Statistics Office of Destatis corrected its harmonized inflation rate to 2.8 % in December in December.
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