Blog #5: Eurozone Economy Witnesses Inflationary Trends
In recent discussions, I have highlighted the signs of an accelerating inflation rate within the US economy. Notably, January's Personal Income data revealed a monthly surge of 0.7%, surpassing forecasts by 0.6%, while the number of initial Jobless Claims stood at 215K. This comes as the Reserve Bank of New Zealand hints at an upcoming rate hike, signaling tightening monetary conditions.
The market's expectations have undergone a significant shift. A month ago, analysts were predicting seven rate cuts, totaling 175 basis points. However, current sentiment has adjusted to anticipate merely three rate cuts, equating to 75 basis points. This adjustment stems from the rapid pace of economic data, suggesting that rate cuts may be off the table until at least the third quarter of 2024.
Turning our gaze to the Eurozone, the latest figures illustrate the region's inflationary momentum. A closer look at the data reveals:
The Core Consumer Price Index (CPI) on a month-to-month basis stands at 0.7%, a stark contrast to last month's -0.9%.
Year-over-year, the Core CPI has risen to 3.1%, marking a 0.2% increase from the previous month's figures.
The monthly CPI has climbed to 0.6%, showcasing a significant jump of 1.0% from last month.
On an annual basis, the CPI has increased to 2.6%, up by 0.1% from prior data.
These inflationary pressures are not occurring in isolation. With the backdrop of rising energy costs, including crude oil (WTI and Brent) and expected cyclical and seasonal spikes in natural gas prices, the Eurozone is aligning with economies like U.S.A. and New Zealand. These regions are navigating the complexities of inflation, spurred by both base effects and rising energy prices.
Associate Professor Mordechai Katash
