On Wednesday, Eurostat, the statistical office of the European Union, released an estimate on Euro inflation levels for the month of November. The information it shows seems promising as it predicts that inflation in the Eurozone will reach 10%, a 0.6 % decrease from October. This would be the first time in 19 months that inflation shows signs of slowing down in all 19 European member states.
The data of the report shows how energy inflation rates are expected to decrease the most (from 41.5% in October to 34.9%), followed by services (from 4.3% in October to 4.2%). Non-energy industrial goods’ inflation is expected to remain stable at 6.1%. The only data that has showed an increase in inflation rates has been food, alcohol and tobacco, which reached 13.6%, compared to 13.1% of the previous month.
Christine Lagarde, President of the European Central Bank, said this trend may be the consequence of the increase in interest rates that the ECB implemented, in a pledge to mitigate the economic consequences of energy price increases.
Despite the positive forecast, Lagarde believes that in the economic panorama of today’s world, it is best to be cautious. “We expect to raise rates further to the levels needed to ensure that inflation returns to our 2% medium-term target in a timely manner,” she said.
Similarly, Andrew Kenningham, chief European economist at Capital Economics, said: “We would not be surprised to see the headline that inflation rates rise again in December or January given the volatility in the monthly numbers, but there is little doubt that it will fall rapidly next year.”
For Bert Colijn, senior Eurozone economist at ING, “seeing that these numbers are lower than most of us were expecting” is good news, and it is important to remain optimistic since in order to rebuild economic prosperity, “you’ve got to start somewhere.”
Overall, the Eurostat’s forecast has stirred the economic communities’ opinion on how to proceed. For some, as Lagarde, continuing with high interest rates is the right path to mitigate this wave of inflation once and for all, while for other economists, relaxing interest rates will allow the EU economy to bounce back and for investors to regain trust in the markets. Only time will tell.
