$EUIRYY -Europe CPI (April/2025)ECONOMICS:EUIRYY
April/2025
source: EUROSTAT
- Consumer price inflation in the Euro Area remained steady at 2.2% in April 2025, slightly exceeding market expectations of 2.1% and hovering just above the European Central Bank’s 2.0% target midpoint, according to a preliminary estimate.
A sharper drop in energy prices (-3.5% vs. -1.0% in March) was offset by faster inflation in services (3.9% vs. 3.5%) and food, alcohol, and tobacco (3.0% vs. 2.9%). Prices for non-energy industrial goods rose by 0.6%, unchanged from March.
Meanwhile, core inflation, which excludes food and energy, climbed to 2.7%, up from March’s three-year low of 2.4% and above the forecast of 2.5%.
On a monthly basis, consumer prices increased by 0.6% in April, matching March’s rise.
EUIRYY trade ideas
$EUIRYY -Europe CPI (March/2025)ECONOMICS:EUIRYY
March/2025
source: EUROSTAT
- Annual inflation in the Euro Area eased to 2.2% in March 2025,
the lowest rate since November 2024 and slightly below market expectations of 2.3%.
Services inflation slowed to a 33-month low (3.4% vs. 3.7% in February),
while energy costs declined (-0.7% vs. 0.2%).
However, inflation remained steady for both non-energy industrial goods (0.6%) and processed food, alcohol & tobacco (2.6%), and unprocessed food prices surged (4.1% vs. 3.0%).
Meanwhile, core inflation, which excludes volatile food and energy prices, fell to 2.4%, slightly below market forecasts of 2.5% and marking its lowest level since January 2022.
On a monthly basis, consumer prices rose 0.6% in March, following a 0.4% advance in February.
$EUIRYY -Europe CPI (November/2024)ECONOMICS:EUIRYY
November/2024
source: EUROSTAT
Euro Area Inflation Rate Rises to 2.3% as Expected
-The annual inflation rate in the Eurozone accelerated for a second month to 2.3% in November from 2% in October, matching market expectations, preliminary estimates showed.
This year-end increase was largely expected due to base effects,
as last year’s sharp declines in energy prices are no longer factored into annual rates.
Prices of energy decreased less but inflation slowed for services.
$EUIRYY -Europe's Inflation Rate (October/2024)ECONOMICS:EUINTR 2%
(October/2024)
+0.3%
source: EUROSTAT
-Annual inflation in the Euro Area accelerated to 2% in October 2024, up from 1.7% in September which was the lowest level since April 2021, and slightly above forecasts of 1.9%, according to preliminary estimates.
This year-end increase was largely expected due to base effects, as last year’s sharp declines in energy prices are no longer factored into annual rates.
Inflation has now reached the European Central Bank’s target.
In October, energy cost fell at a slower pace (-4.6% vs -6.1%) and prices rose faster for food, alcohol and tobacco (2.9% vs 2.4%) and non-energy industrial goods (0.5% vs 0.4%).
On the other hand, services inflation steadied at 3.9%.
Meanwhile, annual core inflation rate which excludes prices for energy, food, alcohol and tobacco was unchanged at 2.7%, the lowest since February 2022 but above forecasts of 2.6%. Compared to the previous month, the CPI rose 0.3%, following a 0.1% fall in September.
$EUIRYY -CPI (September/2024)ECONOMICS:EUIRYY (Eurozone Inflation Data; September/2024)
source: EUROSTAT
- Annual inflation rate in the Eurozone fell to 1.8% in September 2024, the lowest since April 2021, compared to 2.2% in August and forecasts of 1.9%, preliminary estimates showed.
Inflation is now below the ECB target of 2%.
Prices fell much more for energy (-6% vs -3%) and inflation slowed for services (4% vs 4.1%) while prices for food, alcohol and tobacco increased slightly more (2.4% vs 2.3%).
Meanwhile, core inflation rate also eased to 2.7% from 2.8%.
Among the bloc's largest economies, inflation slowed in Germany (1.8% vs 2%), France (1.5% vs 2.2%), Italy (0.8% vs 1.2%), Spain (1.7% vs 2.4%).
The ECB expects inflation to rise again in the latter part of 2024, partly because previous sharp falls in energy prices will drop out of the annual rates.
Inflation should then decline towards 2% over the second half of 2025.
$EUIRYY -EU YoY (CPI) source: EUROSTAT
The inflation rate in the Euro Area declined to 2.9% year-on-year in October 2023,
reaching its lowest level since July 2021 and falling slightly below the market consensus of 3.1% .
Meanwhile,
The Core Rate, which filters out volatile food and energy prices,
also cooled to 4.2% in October;
marking its lowest point since July 2022.
However, both rates remained above the European Central Bank's target of 2%.
The energy cost tumbled by 11.1% (compared to -4.6% in September), and the rates of inflation eased for both food, alcohol, and tobacco (7.5% compared to 8.8%) and non-energy industrial goods (3.5% compared to 4.1%).
Services inflation remained relatively stable at 4.6%, compared to 4.7% in the previous month. On a monthly basis, consumer prices edged up 0.1% in October, after a 0.3% gain in September.
Euro Zone inflation at record highs!This is a big issue for the ECB, and they're very much between a rock and a hard place.
For years the bank has kept policy extremely easy, and the economy has largely become used to this.
However, they are now facing an inflation backdrop that ironically, they probably could only dream of 10 years ago (OK maybe not as high as it currently is, but you get the point).
So what do they do from here?
Just now, ECB's Philip Lane said, 'today's inflation number is very high.'
Clearly then, there is a hawkish pivot occurring in the ECB.
And we can see that the market has been pricing *some* hawkishness since the start of the year, if we look at EURIBOR futures...
EUREX:FEU31!
And the current market implied data suggests that the ECB are set to embark on a hiking cycle.
In picture 1, we can see the Euro Area 1wk refi rate, which suggests that by September, at least a 25bp hike is priced in...
Well, that is simply way too late, so think the odds will have been frontloaded way more now.
In chart 2, we can see the overall policy path, which suggests that the ECB will reach a rate of 1.00% by 2024.
And in chart 3, we can see how likely behind the curve the ECB is, especially with today's inflation prints...
There's likely a trade in here then.
If the market is expecting rate hikes further out, but they actually happen sooner, it's likely that European risk assets will be hit, specifically credit and their corresponding spreads.
This would have a knock on effect to equities.
Higher refinancing rates mean tighter margins.
So pay attention to the ECB going forward, since they have the greatest relative policy pivot from historical out of all
central banks!