- The annual inflation rate in the euro zone cooled to 2.4% in November from 2.9% in October, well below forecasts.
- Core inflation fell to 3.6% from 4.2%, fueling expectations of interest rate cuts from the European Central Bank.
A general view shows a weekend crowd of people visiting the Aachen Christmas market on November 25, 2023 in Aachen, Germany. (Photo by Ying Tang/NurPhoto via Getty Images)
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The euro zone’s annual inflation rate cooled to 2.4% in November from 2.9% in October, quick figures showed on Thursday.
Economists polled by Portal expected a figure of 2.7%.
Core inflation – a closely watched measure by the European Central Bank that excludes the volatile impact of energy, food, alcohol and tobacco – also came in lower than expected, falling to 3.6% from 4.2% in October.
Energy prices continued to see significant year-on-year declines, reaching -11.5% in November. Food, alcohol and tobacco contributed the most to the increase at 6.9%.
Overall inflation has now cooled significantly since its peak of 10.6% in October 2022. Inflation in the euro zone’s largest economies, Germany and France, fell to 2.3% and 3.8%, respectively.
ECB officials have repeatedly stressed that it is too early to declare victory over price increases in the 20-nation euro zone as they keep an eye on potential pressures from wage increases and energy markets.
Mathieu Savary, chief Europe strategist at BCA Research, said traders would now be tempted to bring forward expectations for the timing of the ECB’s first interest rate cut, but argued that the central bank’s concerns about tightening labor markets remain “later rather than later.” earlier” imply interest rate cuts.
Separate data released on Thursday by statistics agency Eurostat showed euro area unemployment remained at a record low of 6.5% in October despite a contraction in the euro area economy in the third quarter.
“Signs of an impending inflation victory are increasing for the ECB,” Bert Colijn, senior euro zone economist at ING, said in a note, adding that some of the effects of existing monetary policy tightening had not yet been felt.
“The market is therefore right to consider rate cuts for 2024. We assume that the first interest rate cuts could well take place before the summer.”