Bankinter: Yesterday Germany’s CPI rebounded more than expected in December to 2.6%. Inflation came in at 2.6% year-on-year from 2.2%, when a more modest rebound to 2.4% was expected.
Team’s view: Disappointing inflation data in December as it showed a stronger than expected rebound. However, we expect CPI to moderate in the coming months in a context of weak economic activity, lower energy prices and more contained wage increases.
France’s harmonised CPI rebounded to 1.8% year-on-year in December from 1.7% in November. However, the rebound is lower than the consensus forecast of 1.9%. This slightly positive inflation surprise in France somewhat counterbalances yesterday’s disappointing German data.
Outside the EU countries, namely in Switzerland, inflation in December fell to 0.6% year-on-year from 0.7%, in line with market expectations. The Underlying Rate falls back more than consensus expectations to 0.7% from 0.9% previously and 0.8% estimated. Fourth consecutive month with CPI data below 1%. The higher-than-expected decline in core inflation provides the SNB with arguments to continue cutting rates to stimulate growth and slow the franc. Looking ahead to 2025, the SNB will most likely make two additional rate cuts at the next meetings on 20 March and 19 June to reach the 0.0% level.
