German inflation in October was 11.6%, well above expectations, Italian inflation was 12.8% and French inflation was 7.1%, all higher than expected and higher than last month. The components will be released mid-month, but some regional figures in Germany show that the big contributors to price increases continue to be energy costs and food. In Spain, inflation slowed yr-on-yr in October to 7.3% on lower electricity, gas prices. Also, in…
Crédito y Caución (Atradius) | High inflation is the current hot economic topic. In June, inflation was running at over 11% in the Netherlands1; for the eurozone it was nearly 9%, which is surely a record. It is also sure that the inflationary bite is being felt, particularly in the purchasing power of lower income groups. The question is, how long will this high inflation last? In recent months, energy…
Juan Pedro Marín-Arrese | Blaming Putin for the current inflationary bout no longer holds. No one disputes that sanctions aimed at crippling the Russian economy following the aggression on Ukraine have made the prices of vital commodities skyrocket, mainly due to wild speculative movements. Nowadays, we are witnessing sharp falls in raw materials while prices gather further momentum. Thus, claiming we only face a cost shock from such products seems…
Monex Europe | Today’s announcement by the European Central Bank can be perceived as net dovish in the short-term by markets, as the shift from an asymmetric target to a new symmetric 2% inflation target gives the central bank ample room to run accommodative monetary policy for longer without having to fight markets. Previously, the ECB’s inflation target was set at “below, but close to 2%”, which contributed to the eurozone’s structural issues with low inflation for years. By changing this target to a symmetric target, which means any undershoots and overshoots would be equally undesirable, the central bank moves the bar slightly upwards for inflation before policy is required to tighten.
Yesterday, Eurostat published the Consumer Price Index (CPI) for June, which rose 0.3% year-on-year. This is a rebound in inflation in the region from the 0.1% rate recorded in May. The figures were in line with analysts’ expectations. However, even with the effect of the German VAT cut, European inflation should become negative again in July.
J.L. M.Campuzano (Spanish Banking Association) | The European Central Bank (ECB) published on Thursday the statistics for monetary aggregates in January. In January specifically, the growth rate accelerated to 5.2% per year. This increase in the M3 money supply continues to exceed the theoretical level compatible with medium and long-term inflation of 2%. The main contribution was from credit to the private sector, with an increase of 3.4% over last year.
With a monetary policy that has already used up almost all of its ammunition, the only factor that could restart the inflation would be a powerful tax stimulus. There is a path that is not being given enough attention and that could well be the missing link: the sustainable tax stimulus.
Francisco Vidal (Intermoney) | The next few days will be interesting as EU leaders confront the future of the European project, although they will also have to deal with the latest developments on Brexit, and no doubt dedicate time to US commercial belligerence.
Just a couple of years ago, deflation was a concern for US economists. And, although it’s true that this threat has almost disappeared, rises in prices have shown themselves to be surprisingly elusive.
The balancing acts which are devised in Frankfurt oblige us to once again take a look at the present and future of inflation in the Eurozone, focusing our analysis on the prices chain. “The ECB did this exercise and the conclusions favour the institution’s caution,” they explain.