Inflation rises again in the Eurozone to hit a multi-decade high

London (Jan 7)  Inflation data for the month of December hit its highest rate since 1985 after reaching 5%. In the report, the dominant energy prices eased slightly but food and goods prices still had an effect, both of which have been affected by higher transport costs and shortages.

ING Bank noted "is this peak inflation? This depends to a significant degree on gas price developments, which have been incredibly volatile in recent weeks and are a dominant driver of the recent inflation surge. Still, at current futures prices for natural gas and oil, energy inflation is likely to have peaked and is set to trend down from here."

The bank added "Non-energy industrial goods inflation already jumped from 2 to 2.9% in the past two months, showing clear signs of costs being priced through to the consumer at a faster pace. We expect this to continue at the start of the new year.".

The ECB still seems to be adamant that there will be no rate rises this year. The changes in QE are also material as ending pandemic stimulus and adding to their regular purchases seem to be the same present wrapped in different paper. the ECB said, “Monetary accommodation is still needed for inflation to stabilize at the 2% inflation target over the medium term,”. Berenberg analysts forecast that the ECB could prepare the ground for a first hike in the spring of 2023.

EU CPI (YoY) (Dec) 5.0% vs exp 4.7% prev 4.9%

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