Markets don't expect an outsized ECB December cut despite below-expected core Eurozone inflation in November.
- The November EZ flash inflation round saw the second consecutive reacceleration from cycle lows in September.
- But while an uptick in headline was expected on the back of energy base effects, the core measure remained unchanged at 2.7%, and some analysts now see it undershooting the ECB’s forecast by about 0.2pp in Q4.
- Services inflation saw softer momentum in November, running at 2.63% 3m/3m SAAR – a YTD low, with the yearly rate decreasing slightly (-0.1pp to 3.9% in Nov).
- But even combined with elevated political uncertainty and a continued subdued growth outlook, the softer services inflation momentum was not able to convince markets to expect an outsized cut at the ECB’s December meeting next week, with meeting-dated OIS pricing around 30bp of cuts for the Dec meeting (vs around 32bp at the beginning of last week).
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