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Euro-zone Final HICP (Oct.)

October’s euro-zone inflation data confirm that core price pressures are weaker than in other advanced economies. That said, we think headline inflation will remain above 2% until late 2022.
Jack Allen-Reynolds Senior Europe Economist
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European Data Response

German Ifo Survey (May)

The Ifo survey for May suggests that activity in Germany may be holding up a little better than we had feared. But the headline Business Climate Index is still consistent with GDP contracting in year-on-year terms and the expectations component shows that businesses think the situation will get worse. ECB Drop-In (24th May 10:00 ET/15:00 BST): Could the ECB deliver a hawkish surprise? Join economists from our Europe and Markets teams for a discussion about what to expect from the Bank’s tightening cycle, including the chances for a bumper hike in July or even an early move at next month’s meeting. Register now.

23 May 2022

European Data Response

Euro-zone Consumer Confidence (May)

The small increase in euro-zone consumer confidence in May left it only slightly higher than its low point at the start of the pandemic. With confidence extremely low and real incomes squeezed by high inflation, we expect a drop in household spending to cause the euro-zone economy to contract in Q2.

20 May 2022

European Economics Weekly

High inflation, record trade deficit

Data released over the past week revealed that the euro-zone recorded its first monthly current account deficit since 2012 and provided further evidence that underlying price pressures are building. We expect the latter to prompt the ECB to raise rates by 25bp, if not 50bp, in July. Next week, the PMIs and Ifo for May will provide more evidence that the euro-zone and German economies are at risk of recession. ECB Drop-In (24th May 10:00 ET/15:00 BST): Could the ECB deliver a hawkish surprise? Join economists from our Europe and Markets teams for a discussion about what to expect from the Bank’s tightening cycle, including the chances for a bumper hike in July or even an early move at next month’s meeting. Register now.  

20 May 2022

More from Jack Allen-Reynolds

European Economics Focus

ECB will persist with QE and negative rates for years

We expect the ECB to interpret a period of above-target inflation as “transient” even if it lasts for well over a year. Although it will end its emergency PEPP programme next March, the Bank will step up the pace of its conventional asset purchases, most likely from €20bn to €40bn per month, and leave its key policy rate unchanged at -0.5% until around 2025. It is also possible that the Bank establishes a “backstop fund” to be used in the event of an exceptional widening of credit spreads. All in all, our forecasts suggest that policy will remain very loose for longer than the markets currently anticipate, and this in turn should help the ECB to keep a lid on both core and peripheral sovereign bond yields.

15 November 2021

European Economics Weekly

Covid cases and inflation on the rise

Inflation releases in Germany and the US this week highlighted how price pressures are still weaker in the euro-zone. Next week, we will get the full breakdown of euro-zone inflation in October, which will give us more detail on the drivers of the increase in core inflation. Meanwhile, other data next week should confirm that that euro-zone GDP grew by 2.2% in Q3, but with daily Covid infections now having risen to the highest level since April, and showing little sign of slowing, there is evidence that consumers are becoming more cautious.

12 November 2021

European Economics Update

Effect of shortages on activity and inflation will persist

There is growing evidence that global goods shortages are weighing on euro-zone activity. We expect this to contribute to a marked slowdown in growth in Q4, and the outlook for early 2022 is no better. What’s more, it looks likely that the shortage-driven increase in goods inflation has further to run.

5 November 2021
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