Eurozone inflation falls for the first time in 17 months – Digital Journal

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Eurozone inflation had hit a new all-time high every month since November 21, driven by fuel prices – Copyright AFP Kenzo TRIBOUILLARD

Daniel ARONSSOHN

The eurozone’s annual inflation rate fell for the first time in 17 months in November, easing to 10 percent, official data showed on Wednesday.

Fueled by rising energy and food bills triggered by Russia’s war in Ukraine, the rate of price increases has hit a new all-time high every month since November 21.

Analysts had expected the inflation rate in the single currency area to fall, but the drop was steeper than forecast by Bloomberg and FactSet, which forecast 10.4 percent.

Inflation had reached 10.6 percent in October.

But the November figure may not convince the European Central Bank that it can stop raising interest rates, as its president, Christine Lagarde, has expressed skepticism that inflation has peaked.

Still on Monday, Lagarde warned: “I think there is too much uncertainty… to assume that inflation has really peaked. It would surprise me.

Analysts said the reverse in trend could see the bank opt for a smaller 50 basis point rate hike next month instead of the expected 75 basis point hike.

“Good news was in store for us,” said Bert Colijn, senior eurozone economist at ING bank. “Eurozone inflation rate eased after some nasty surprises on the upside.”

– Food price inflation rises –

However, he warned that core inflation remained stable.

“It remains to be seen if this is the peak of inflation,” he said.

“Another episode of the energy crisis could easily send inflation back up, and core inflation is often stagnant after a supply shock.”

Andrew Kenningham, chief European economist at Capital Economics, also issued a caveat.

“Eurozone headline inflation may already be past its peak, but with core inflation flat in November and likely to remain well above 2 percent over the next year, we expect the ECB to push hard.” another 50 basis point or even 75 basis point increase in the deposit rate in December,” he said.

A slowdown in the speed with which energy prices rise was the main reason for the fall in headline inflation in November, offsetting the acceleration in food and beverage costs.

Among the 19 countries that use the euro, Spain now has the lowest inflation rate, falling to 6.6 percent compared with the previous top performer, France, now at 7.1.

Germany and Italy still have high inflation rates, but both fell slightly, with the former down 0.3 percentage point to 11.3 percent and the latter down 0.1 point to 12.5 percent.

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