Slowing inflation could prompt the European Central Bank to reconsider interest rates

Germany followed Spain and Belgium in reporting slower inflation, providing ammunition for those who want the European Central Bank to slow the pace of rate hikes.

Consumer prices in Europe’s biggest economy rose 11.3 percent year on year in November, compared with the 11.6 percent jump in October, the statistics office said, citing factors such as energy costs for the slowdown.

Analysts polled by Bloomberg had expected a price increase of 11.3 percent.

In Spain, inflation weakened for a fourth month and more than expected, on the back of falling electricity and fuel costs, although an indicator of underlying prices was accelerating. Meanwhile, the headline count in Belgium slowed to 10.6 percent.

Inflation data for the 19-nation euro zone is due on Wednesday, with economists also expecting a slight slowdown.

This reading will be crucial as ECB officials weigh a third straight 75bps hike in borrowing costs or a smaller half-point move ahead of a likely recession.

Some officials already favored a more modest increase in October, according to a report from the meeting, and their voices could become louder if price growth appears to be slowing.

Others are less convinced. ECB President Christine Lagarde said on Monday she would be “surprised” if record gains in the euro zone had peaked, while Executive Board member Isabel Schnabel recently said it may be too early to slow rate hikes.

Cooling headline inflation could prompt officials to place more emphasis on the core gauge when determining whether a turning point has been reached. ECB Vice President Luis de Guindos said on Tuesday the underlying measure was “the signal that we must continue to follow”.

Natural gas costs will be key in determining the path of inflation in Germany, which relied heavily on Russia as a supplier prior to the war in Ukraine.

The government is now rushing to find other sources.

https://www.independent.ie/business/world/slowing-inflation-may-start-prompting-european-central-bank-rethink-on-rates-42183753.html Slowing inflation could prompt the European Central Bank to reconsider interest rates

Fry Electronics Team

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