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 remained contingent on energy markets and agricultural challenges impacting food prices.
“[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.”
Italy will report on inflation figures Thursday, followed by a flash estimate for the euro area on Friday.
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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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“Our economists continue to believe that the US will avoid recession as the Fed successfully engineers a soft landing of the economy,” analysts wrote Tuesday.
“This out-of-consensus forecast partly reflects our view that a period of below-potential growth is enough to gradually rebalance the labor market and dampen wage and price pressures,” the note said. “But it also reflects our analysis that indicates that the drag from fiscal and monetary policy tightening will diminish sharply next year, in contrast to the consensus view that the lagged effects of interest rate hikes will cause a recession in 2023.”
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The U.K.’s FTSE 100 index is expected to open 11 points higher at 7,570, Germany’s DAX 28 points higher at 14,227, France’s CAC up 9 points at 6,643 and Italy’s FTSE MIB up 31 points at 24,449, according to data from IG.
In Europe Tuesday, markets closed higher, buoyed after Germany published lower-than-expected inflation figures for December, down to 9.6% year on year. Inflation figures from France are due on Wednesday.
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