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EUROPEAN INFLATION: MNI Eurozone Inflation Preview - December 2024

EUROPEAN INFLATION
While core inflation is seen remaining near 4% Y/Y in December, services inflation is seen moderating slightly.
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Services Momentum To End Year On A Soft Note?

  • The holiday season stretches the December Eurozone inflation round over two weeks this year. It also has limited the number of analyst expectations for the data to only a handful, which centre on a higher headline number underpinned by energy base effects, for a current MNI median Eurozone estimate of 2.4-2.5%.
  • That would represent a pickup from 2.2% prior, though core inflation is seen steady at 2.7%. MNI will provide updates on any changes to consensus as we emerge from the holidays.
  • There are expectations that service inflation could moderate slightly in December vs November, but that would still leave services HICP in the 3.8-3.9% Y/Y area (3.9% Nov).
  • Methodological issues are a key theme, both in terms of assessing the apparent softening of seasonally-adjusted sequential services inflation in recent months, and looking ahead, to January's annual category repricings / reweightings.
  • While markets fully expect a 25bp cut at the next ECB meeting in January, they currently price only a 10% implied chance of an outsized 50bp cut  – well off dovish extremes of around a one in three chance expected towards the end of November.

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Services Momentum To End Year On A Soft Note?

  • The holiday season stretches the December Eurozone inflation round over two weeks this year. It also has limited the number of analyst expectations for the data to only a handful, which centre on a higher headline number underpinned by energy base effects, for a current MNI median Eurozone estimate of 2.4-2.5%.
  • That would represent a pickup from 2.2% prior, though core inflation is seen steady at 2.7%. MNI will provide updates on any changes to consensus as we emerge from the holidays.
  • There are expectations that service inflation could moderate slightly in December vs November, but that would still leave services HICP in the 3.8-3.9% Y/Y area (3.9% Nov).
  • Methodological issues are a key theme, both in terms of assessing the apparent softening of seasonally-adjusted sequential services inflation in recent months, and looking ahead, to January's annual category repricings / reweightings.
  • While markets fully expect a 25bp cut at the next ECB meeting in January, they currently price only a 10% implied chance of an outsized 50bp cut  – well off dovish extremes of around a one in three chance expected towards the end of November.

PDF Analysis Here:

Keep reading...Show less