The rate fell to 9.2% in December, almost a point since November, with Spain recording the best figures in the Eurogroup
Inflation in the Eurozone fell to 9.2% in December, almost one point from 10.1% in November, largely due to the ongoing slowdown in energy prices across Europe. Eurostat figures released this Friday confirm that the price record for eurozone countries was broken in October, when the rate reached 10.6% after a year and a half of continuous increases.
Energy cost 25.7% more in December than a year earlier, but it is significantly lower than the 34.9% in November. The problem now is the increase in food prices, which continue to rise, at 13.8% year-on-year compared to 13.6% the previous month. The countries with higher inflation were Latvia (20.7%), Lithuania (20%) and Estonia (17.5%), even though inflation rates were lower than those of previous months.
Among the European powers, the data of Italy (12.3%) and Germany (9.3%) stand out, compared to the records of France (6.7%) and especially Spain (5.6%), which is the best Eurozone inflation figures for another month. Inflation data for the Eurozone doubles that of Spain.
This moderation in prices – although still at very high levels – will lead to less pressure on the European Central Bank (ECB) in the coming days, ahead of the meeting that the institution, led by Christine Lagarde, will hold on February 2 to decide What does it do with interest rates? In the previous one, Frankfurt already warned that it will continue to increase the official money price in the eurozone as much as necessary. Lagarde himself has already talked about stealthily taking them to “restrictive” levels.
All analysis houses agreed that after the interest rate hike to 2.5% in December, the ECB would make two more hikes in this first tranche of 2023: 0.5 point in January and another 0.5 point in March. In other words, raise them to 3.5%, a level the European economy has not seen since 2008, at the start of the major financial and sovereign debt recession.
However, the ECB can take its foot off the accelerator. Certainly not in the short term. Here’s how Manuel Pinto, an analyst at XTB, puts it, who recalls that inflation is “still very high”. And so that will “continue to fight interest rate hikes, albeit possibly less aggressively” compared to what the central bank had thought so far.
Pinto believes that prices above 5% or 6% are “too high” for an economy like the Eurozone, whose target is 2%. Moreover, he points out that any decision of the ECB “will be based on the guidelines of Germany. This expert points out that “as we see inflation slowing down, central banks should delay rate hikes”.
There is an important thermometer to determine which way to go: the Euribor. And for now, the mortgage indicator shows no signs of stability. On the contrary. After the end of December, the interbank rate is above 3.3% below 3%. By acting as a harbinger of what the official price of money will do, which is 2.5%, there is still room for the ECB to keep increasing it until it reaches around 3.5% and even 4%, thereby assuming that the Euribor can end during this exercise.
World food prices fell in December but rose more than 14% over the whole of 2022 from the previous year, reaching their highest level in the historic series. This was emphasized on Friday by the FAO, the UN’s Agriculture and Food Organization.
The decline in the index in December was caused by a sharp fall in the international price of vegetable oils, along with some declines in grain and meat prices, but mitigated by slight increases in those for sugar and dairy products, the FAO says in its statement. They explained that food prices rose after the Russian invasion of Ukraine over fears of Black Sea trade disruptions.
Source: La Verdad
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
