DWS: Eurozone inflation uncertainty remains

DWS: Eurozone inflation uncertainty remains

January 5, 2024

Inflation
Rente (02) euro geld monetair beleid.jpg

Ulrike Kastens, Economist Europe at DWS comments on December's inflation numbers in the eurozone:

'As expected, inflation in the eurozone has risen for the first time since April 2023. The rise in the cost of living accelerated to 2.9 per cent, after 2.4 per cent in November. This is mainly due to base effects from last year. Energy prices again recorded the strongest decline, falling by 6.7 percent in December. Food prices also continued to fall slightly year-on-year. They rose by only 6.1%, after 6.9% in November. Encouragingly, they did not rise further compared with the previous month. Together with the lower price increase at the producer level, this suggests that the worst of the food price trend should be behind us.

The development of the core rate is also positive. It fell from 3.6 per cent to 3.4 per cent in December. However, this was entirely due to lower price increases for consumer durables. Prices in this segment are now rising by only 2.5 per cent. By contrast, services prices remained elevated at 4.0 percent in December. They are likely to remain the European Central Bank's problem child this year. Surveys show that companies still want to raise prices as cost pressures remain high.

Given the volatility in inflation, partly due to energy price increases in Germany, it is too early to declare victory on inflation. The labour market is still stable and wages and labour costs are rising. This does not argue in favour of rapid interest rate cuts by the ECB.'

 

Related posts