European markets advance as investors await Fed minutes
French inflation slows unexpectedly
The skyline from the Arc de Triomphe in Paris, France.
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Inflation in France slowed to 6.7% in December from a record high of 7.1% the previous month, preliminary figures published Wednesday morning showed.
Economists polled by Reuters had forecast year-on-year harmonized inflation, which is adjusted for comparisons across the euro area, to come in at 7.2%.
The most significant drop was in energy, where prices rose by 15.1% annually, down from 18.4% in November.
That follows inflation slowing more than expected in Germany, which on Tuesday reported HICP falling to 9.6% from 11.3%; and in Spain, which last week recorded a fall to 5.8% from 6.7%.
Analysts are looking for indications that inflation has peaked in the euro zone’s main economies; and whether this will influence the European Central Bank, which previously said interest rates would need to go “significantly” higher.
Analysts at ING said the path to substantially lower inflation rates would not be easy, and the outlook remained reliant on factors such as warmer weather and continued pipeline pressure affecting energy prices; the war and agricultural sector challenges affecting food prices; and government support programs.
“[Germany’s] inflation numbers are not a relief, yet, only a reminder that eurozone inflation is still mainly an energy price phenomenon,” they said in a note. “The ECB cannot and will not base its policy decisions on highly volatile energy prices.”
They expect hikes totaling 100 basis points over the next two meetings and updated macro forecasts in March.
Italy will report on inflation figures Thursday, followed by a flash estimate for the euro area on Friday.
— Jenni Reid
Swiss annual inflation at 2.8% in 2022
Swiss consumer prices added 2.8% year-on-year and eased by 0.2% on the month in December, the Swiss Federal Statistical Office said today.
It found Swiss inflation averaged 2.8% in 2022, up from 0.6% in 2021. It attributed the annual hike to higher costs for petroleum products, gas, cars and house rentals, which offset price declines for medicines and fixed-line and mobile communication.
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