A customer shopping for groceries in Helsinki on 6 July 2023. Data from Eurostat indicate that unprocessed food prices rose by 6.7 per cent year-on-year in December, helping to put an end to a 13-month period of decelerating inflation. Core inflation, however, continued to slow down, clocking in at 3.4 per cent. (Mikko Stig – Lehtikuva)
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INFLATION picked up in the eurozone in December.
Eurostat on Friday released preliminary data indicating that consumer prices increased by 2.9 per cent year-on-year in December, marking the end of a 13-month period of slowing inflation in the 20-country monetary union.
Inflation in Finland came in at 1.5 per cent, according to the data. Slovakia and Austria witnessed the most significant year-on-year rises in consumer prices, 6.6 and 5.7 per cent respectively. In Belgium and Italy, by contrast, inflation stood at 0.5 per cent.
In November, inflation in the eurozone clocked in at 2.4 per cent.
The prices of energy declined by 6.7 per cent year-on-year, according to the preliminary data. The prices of unprocessed foods rose by 6.7 per cent, services by 4.0 per cent and industrial products by 2.5 per cent. Core inflation, which excludes highly volatile items such as food and energy, stood at 3.4 per cent in December, representing a 0.2-point drop from November.
“The slowing of core inflation suggests that in the big picture inflation has continued to abate. Unless something unpredictable happens in the near future, I believe it is possible that the European Central Bank lowers its benchmark rates in March, even though we are forecasting that the first easing of monetary policy will not occur until later in the spring,” Heidi Schauman, the research director at Danske Bank, said to Helsingin Sanomat.
Jari Hännikäinen, a market economist at OP Financial Group, estimated that the up-tick in inflation is temporary and was caused primarily by the expiration of energy subsidies in Germany.
“Core inflation letting up is a sign that the ECB has managed to slow down inflation with tight monetary policy. According to our forecast, the ECB will lower its benchmark rate for the first time in June,” he said to the newspaper.
Also he gauged that it is possible that the easing begins earlier because the deterioration of the eurozone economy creates pressure to beef up the economy by lowering benchmark rates.
The ECB, the newspaper reminded, warned about the possibility of an up-tick in consumer prices as it affirmed its current policy position in mid-December. Its monetary policy is therefore expected to remain tight; its benchmark deposit rate has never before been at the current level of 4.0 per cent.
Although its latest forecast indicates that inflation will average at 2.7 per cent in 2024, 2.1 per cent in 2025 and 1.9 per cent in 2026, the monetary authority pointed out that internal price pressures in the eurozone remain substantial mostly due to a significant rise in unit labour costs. The markets are nevertheless expecting some signs of an upcoming interest rate cuts when the authority announces its next policy decisions in late January.
Aleksi Teivainen – HT
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Source: www.helsinkitimes.fi
