Eurozone Inflation Drops For First Time Since 2021

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Facts

  • According to data released Wednesday, eurozone inflation slowed for the first time in November since mid-2021 as energy prices eased.
  • This comes as on Monday, European Central Bank (ECB) Pres. Christine Lagarde conveyed skepticism that inflation has peaked as the ECB is expected to make another rate hike in mid-December.
  • The data from the EU's statistics agency showed that consumer prices in November were 10% higher than a year earlier, down from the 10.6% annual rate of inflation recorded in October and lower than some estimates of 10.4%
  • Earlier this month, the European Commission said that the eurozone is likely to fall into a recession this winter as inflation lasts for longer than expected.
  • Economists say the slowing rate of eurozone inflation may make it likely that the ECB's next rate hike is more modest, following two consecutive 0.75-point increases.

Sources: CNBC, DW, Wall Street Journal, and Financial Times.

Narratives

  • Narrative A, as provided by Reuters. While the road to economic recovery is far from over, the latest data brings much-needed relief to the eurozone's tumultuous economic environment and signals that the ECB's strategy may finally be working, strengthening the case for more moderate ECB action next month. This is good news.
  • Narrative B, as provided by The New York Times. Although this is a welcomed reverse to months of unabating price increases, it's too soon to ease monetary tightening. Inflation may have eased in November, but so did economic growth — the eurozone isn't out of the woods, and to pretend otherwise would have disastrous consequences.