Eurozone inflation rises to 2.3 percent in November. All eyes on the ECB

Brussels – Due to food costs remaining high and a smaller-than-expected drop in energy, expected inflation in November for the eurozone is at 2.3 percent, up 0.3 percentage points compared to October and above the reference target of the European Central Bank, which is being called upon to decide whether or not to cut interest rates.  The preliminary data released by Eurostat will inevitably be considered by the Governing Council, with the usual uncertainties, since the European statistical agency will provide final data on December 18, while the ECB’s Governing Council will meet in Frankfurt a week earlier, on December 12.

Regardless of what the ECB may decide, the available information is that in November, services will record the highest annual rate (3.9 percent, compared with 4 percent in October), followed by food, alcohol, and tobacco (2.8 percent, compared to 2.9 percent in October), non-energy industrial goods (0.7 percent, compared to 0.5 percent in October) and energy (-1.9 percent, compared to -4.6 percent in October).

At the country level, while inflation should be stable in Germany (2.4 percent) and almost stable in France (1.7 percent, +0.1 pct pt), it explodes in Italy (from 1.0 percent to 1.6 percent between October and November) and in Spain (also a 0.6 percentage point increase as in Italy but inflation at 2.4 percent). The situation is deteriorating overall, especially among the major eurozone economies, and this could complicate the already complex decisions regarding interest rates and potential cuts. The ECB didn’t budge when things looked rosier, and it is even less likely to take a stance now. The principle of data-dependent decisions remains unchanged, and eurozone data is now less supportive.