Eurozone CPI Inflation Came in Lower Than Expected
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Summary:
- Eurozone CPI inflation came in lower than expected.
- CPI inflation drops for the first time since May 2022.
- Initial market reactions.
The Eurozone CPI inflation
The market had originally forecasted a CPI (YoY) inflation of 10% for the Eurozone, the actual figure came in at 9.9%, missing market expectations slightly. This could indicate to the market that the European Central Bank should continue its interest rate hiking cycle.
The falling inflation during September marks the first drop in Eurozone CPI inflation since May 2022. The falling inflation could provide the European Central Bank with an incentive to continue on their hawkish interest rate hiking path.
Effect of the CPI inflation data
When the European Central Bank meets again at the end of the month, it is anticipated that it will boost its benchmark interest rates by an additional 75 basis points, adding to the total number of rises announced since July of 125 basis points. However, the Euro Area is predicted to "stagnate later in the year and in the first quarter of 2023," and the fear of a weakening economy may induce the central bank to implement lower rate increases over the following months.
With the U.K. inflation figures, concerns that central bank tightening may cause a worldwide downturn have reemerged, reversing the previous upbeat feeling brought on by solid earnings reports and dissipating concerns about systemic risk from Britain's debt markets. The U.K’s hotter than expected inflation figure has also put pressure on the markets.
In addition, the European economy has been weighed down by the conflict between Russia and the Ukraine, and the looming energy crisis.
The Initial market reaction in the wake of the softer than expected CPI inflation data saw the Euro weaken against both the US Dollar and the Pound sterling. The initial market reaction saw both the HSBC shares and the iBEX index rise.
Sources: finance.yahoo.com, marketsummary.com, ft.com, investing.com
