Eurozone Inflation Falls to 8.5%: 3rd Month of Continued Decline

Paigambar Mohan Raj
Source: BTC

Inflation in the Eurozone has fallen to 8.5%, down from 9.2% in December 2022. Data released in the morning shows that in the last quarter of 2022, the euro zone’s GDP increased by 0.1%. The result was better than the 0.1% fall that experts predicted. However, the data reflects a decrease, from the 0.3% increase in the third quarter.

Eurozone CPI (consumer price index) fell by 0.4% month over month, mirroring the decline from December. Economic experts had predicted a 0.3% drop.

However, the numbers do not include the statistics from Germany, the region’s biggest economy. Instead, the January publication relies on estimations rather than vital inflation data. The nation’s statistics office suddenly decided to push the release of its figures until the following week due to technical problems.

The European Central Bank’s attempts to determine whether inflation in the Eurozone may have peaked before its most recent interest rate decision on Thursday, are likely to be frustrating.

In January, the energy sector remained the key cost driver but again declined from prior levels. Energy costs decreased from 25.5% in December to an expected 17.2% in January. However, the price of food increased somewhat in January from 14.1% to 14.8% in December.

Will the Eurozone raise interest rates after the inflation data?

It is anticipated that the area Eurozone would increase borrowing costs by 50 basis points. Last month, ECB President Christine Lagarde committed to “stay the course” on a recent round of monetary policy tightening intended to curb what she has called “way too high” inflation in the Eurozone.

The ECB ended an eight-year experiment with negative interest rates and growing amounts of quantitative stimulus last year. The ECB did this by raising its main deposit rate, which serves as a floor for euro money market rates, by 2.5%.

Major economies around the world are witnessing a falling inflation rate. In the U.S., inflation fell to 6.5%, while in the UK, it dropped to 10.5%. The data indicate that the economic crisis is cooling after what was one of the worst years for the financial industry.