Inflation in the eurozone reaches 5% in December and closes the year with an average of 2.6%, exceeding the objective of the ECB

Prices continued to rise in Europe in the last month of the year taking the eurozone's average inflation up to 5%, the highest rate since 1985, compared to 4.9

Inflation in the eurozone reaches 5% in December and closes the year with an average of 2.6%, exceeding the objective of the ECB

Prices continued to rise in Europe in the last month of the year taking the eurozone's average inflation up to 5%, the highest rate since 1985, compared to 4.9% that had registered in November, according to the advanced data published this Friday By the Community Statistics Office, Eurostat.

If this data is confirmed, the average inflation will have remained at 2.6% by 2021, six tenths above the 2% target that marks price stability according to the European Central Bank (ECB), but below average In Spain, which stood at 2.78% after December the IPC was fired up to 6.7%. This led our country to be the one that presents greater price increases among those developed, as the world today.

By components, the energy was the one that rebounded the most in December, 26%; Followed by food, alcohol and tobacco (+ 3.2%), non-energy industrial goods (+ 2.9%) and services (+ 2.4%).

The underlying inflation - without having energy products or fresh food - stood in December at 2.7%.

Once the December data is known, experts as the economists of the British Capital Capital Economics consultancy believe that in December the peak has been reached, but they are difficult for the underlying inflation - the most important for the ECB of 2% on average in The year 2022.

"We suspect that December was the inflation peak of the euro zone (...). However, we believe that the underlying inflation will averaging around 2%, without clear signs of downward trend. Inflation It remains extremely high and this will take time to be transformed into inflation of non-energy industrial goods. And although we do not expect an increase in salaries to cause acceleration of services inflation, if the demand is recovered quickly after that Restrictions are lifted and consumers become less cautious, experience suggests that labor shortage could be intensified, "they point.

As a result, they believe that there is a "growing probability that at the end of the year the ECB begins to prepare the land for modest interest rate increases in 2023".

Bert Colijn, Senior Economist for the EURZONE DE ING, agrees that the underlying inflation will be above 2% at least in the first half of 2022, although it is not so sure that the inflation peak has been reached.

"It depends to a large extent on the evolution of gas prices, which have been incredibly volatile in recent weeks and a dominant factor of the recent increase in inflation. Even so, given the current futures prices for natural gas and oil , it is likely that energy inflation has reached its maximum point and a downward trend is established from here. In addition to that, the effect of German VAT, which raised inflation during the last month in December, will reduce around 0.5 % general inflation as of January, "he says.

In his opinion, given that there have not yet been second round effects on wages, "the ECB still has time to see how fast the current inflation decreases on the offer side during the year before making a decision about new actions ".

The inflation data of this Friday has been known after the minutes of the last meeting of the Federal Reserve of the United States (the Fed, their Central Bank) came to Light on Wednesday, in which they already collected that they saw "justified "Advance the rise in interest rates due to high inflation, which has unleashed falls in the bags.

Ben Lairler, global market strategist of the investment platform in ETOO multi-hackers, believes that the inflation peak "is close", but recalls that inflation is below that of the US and that will go down as supply chains they relax.

"This means that the European Central Bank shows reluctance to raise interest rates this year. It also maintains the weakness of the euro, a key support for the benefits and exports of European companies," he adds.

Updated Date: 07 January 2022, 07:28

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