admin
Inflation in the euro zone dropped for a second consecutive month in December, but analysts do not expect it to spark a change in tone from the European Central Bank.
Headline inflation, which includes food and energy costs, came in at 9,2 percent year-on-year in December, according to preliminary data Friday from the European statistics agency, Eurostat.
It follows November’s headline inflation rate of 10,1 percent, which represented the first slight contraction in prices since June 2021.
The euro area economy has come under immense pressure in the wake of Russia’s invasion of Ukraine in February 2022, with energy and food costs soaring last year.
In an effort to battle rising prices, the European Central Bank increased interest rates four times in 2022 and said it is likely to continue doing so this year. The bank’s main rate currently sits at 2 percent.
Despite further signs that inflation is easing, analysts say it is too early to celebrate and do not expect a pivot from the region’s central bank.
Interest rates will “get to 3 percent and probably have to hold that all through the year even as the recession becomes more and more evident,” Hetal Mehta from Legal & General Investment Management told CNBC’s “Street Signs” Thursday.
It comes after ECB President Christine Lagarde struck a particularly hawkish tone in December: “We’re not pivoting, we’re not wavering, we are showing determination.” She added that the bank has “more ground to cover.”
The ECB cannot and will not base its policy decisions on highly volatile energy prices.
Speaking earlier last week, ECB Governing Council member and French Central Bank Governor Francois Villeroy de Galhau said interest rates might peak by this summer. — CNBC.
Online Reporter