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Inflation Rate In Eurozone Reduces Slightly At 10% Due To Slowing Down Of Hike In Energy Costs


Inflation Rate In Eurozone Reduces Slightly At 10% Due To Slowing Down Of Hike In Energy Costs
According to preliminary figures released Wednesday, eurozone inflation slowed slightly in November, with prices falling from record highs and falling short of analyst expectations.
For several months, consumer prices in the 19-member region have been sky high. Last month, inflation surpassed 10%, highlighting the severity of the bloc's cost-of-living crisis.
The preliminary data released Wednesday by Europe's statistics office showed headline inflation at 10% year on year this month, a 0.6 percentage point decrease from October.
Energy and food continued to contribute to high inflation rates, but with a noticeable decrease in the former. According to Eurostat, the annual rate of energy is expected to be 34.9% in November, down from 41.5% in October.
“The fall in headline HICP inflation from 10.6% in October to 10.0% in November was the first decline since June 2021 and was a bigger fall than originally expected,” Andrew Kenningham, chief Europe economist at Capital Economics said in a note.
“We would not be surprised to see the headline inflation rate 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,” he added.
Shortly after the figures were released, the euro fell slightly against the British pound, trading at £0.863, and rose about 0.4 percentage point against the US dollar, trading at $1.037.
The drop in inflation follows a similar set of data from the United States. The October consumer price index came in lower than expected earlier this month.
According to reports earlier this month, the general view of the authorities was that peak inflation in the zone was "within reach." As a result, Edward Scicluna, governor of the Bank of Malta said that he does not expect a repeat of the previous rate hike of 75 basis points.
Rates are expected to rise by 50 basis points in December, according to market expectations.
Lower inflation figures may be a representation of recent interest rate increases, implying smaller, or less, rate hikes in the coming months. However, ECB President Lagarde predicted further changes to the bank's benchmark rate earlier this week.
“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 told European lawmakers.
The Fed has raised interest rates three times this year and is expected to do so again in December. However, the number of rate hikes announced by the ECB next year is highly uncertain.
Some economists argue that officials will need to take a break to allow the real economy to adjust to higher rates, while others believe inflation is so high that further rate increases are required.
In September, the ECB predicted that annual headline inflation would reach 8.1% in 2022 and 5.5% in 2023. When the Fed meets in December, these figures are expected to be revised upward.