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The euro zone’s annual inflation rate rose to 2.3% in November, once again exceeding the European Central Bank’s 2% target, statistics agency Eurostat said on Friday.
Economists polled by Reuters had expected the annual growth rate to be 2.3%, up from 2% in October.
As expected, the inflation rate in the region has risen for the second consecutive month after falling to 1.7% in September as the effects of deflation caused by energy prices have faded.
Core inflation, which excludes volatile energy, food, alcohol and tobacco prices, remained at 2.7% in November for the third straight month.
Core interest rates are supported by the tenacity of service inflation, which stood at 3.9% in November, down slightly from 4% in the previous month.
Markets have fully priced in the ECB’s fourth 25 basis point interest rate cut in December this year.
Expectations that the central bank could cut rates by as much as 50 basis points have receded since last month, as the euro zone’s weak growth outlook improved slightly and inflation picked up.
Inflation was slightly higher than expected in October, but ECB policymakers, including board member Isabel Schnabel, have emphasized the need to be cautious about monetary easing.
The ECB’s decisions will primarily depend on the latest staff macroeconomic forecasts it receives just before its December 12 Governing Council meeting. The central bank is also considering the recent election of Donald Trump as U.S. president, including whether Trump will follow through on his threat to impose universal trade tariffs and how such measures would affect European Union exports. We also plan to consider the potential global impact of this.
of EUR There was little change against the US dollar and British pound after the data was released.
Kyle Chapman, a foreign exchange market analyst at Ballinger Group, said in an email that the rise in headline inflation was solely due to year-on-year changes in energy prices, and the ECB views last month’s 0.9 percentage point decline favorably. He said it would be. Monthly service inflation.
“While the growth outlook looks soft, there remains no doubt that inflation will fall to 2% next year on a sustainable basis,” Chapman said, adding that the market still remains on track for a 25 basis point gain in December. He added that he seemed to have calmed down. .
“The economy has not yet fallen off a cliff and there is uncertainty about where the neutral rate will be, so there is no pressing need to start making front-loaded cuts,” he said.
Melanie de Bono, senior European economist at Pantheon Macroeconomics, said that by combining inflation statistics with recent data showing record-low unemployment and an increase in negotiated wage growth in the third quarter, (bp) cuts will be prevented.
De Bono said the final decision on monetary policy remained a “close call” as the ECB’s more dovish members pushed hard for a 50 basis point (bp) cut. He added that if the central bank insists on cutting rates by 25 basis points, it is likely to follow this step with similar rate cuts at its next meetings in January and March.
