ECB will have new inflation data to ponder this week

Sun, 26 Nov, 2023 - 19:41

Vince Golle and Craig Stirling

Inflation gauges in the US and eurozone are set to show the smallest annual increases since early or mid-2021, reinforcing sentiment that interest rates will not be raised again.

The US Federal Reserve’s preferred measures will be published on Thursday, with the personal-consumption expenditures price index rising 3.1% in October from a year ago. The core measure, which excludes food and fuel and is considered a better gauge of underlying inflation, is expected to have climbed to 3.5%.

Eurozone data for November, also due on Thursday, will probably show inflation at 2.7%, the lowest since July 2021. The underlying measure is seen slowing to 3.9%.

Despite the disinflation progress, officials on both sides of the Atlantic want to see more evidence to be sure that consumer prices are durably under control.

Last week, European Central Bank president Christine Lagarde said that “we’re certainly not declaring victory”.

US Fed officials are united on being deliberate about the path for policy. Minutes of their last meeting showed that they took note of how higher rates were starting to squeeze households and businesses.

The Fed, on Wednesday, will issue its so-called Beige Book of economic conditions and anecdotes from across the country.

The US personal-income and spending report is also forecast to show only a slight advance in inflation-adjusted consumer outlays.

The October downshift in demand helped explain forecasts for a slowdown in the economy after a third-quarter growth spurt.

Elsewhere, the Paris-based OECD will present a new set of forecasts, Ms Lagarde will speak to MEPs, and central banks from New Zealand to South Korea are expected to keep rates on hold.

Testimony by Ms Lagarde to the European Parliament on Monday will provide investors with something to trade on before the inflation data.

Those numbers will arrive after a drip of national reports that are mostly expected to show a synchronised decline across major economies, albeit at varying levels. On Wednesday, the CSO publishes the EU-harmonised Irish index of consumer prices for November.

While Spanish inflation probably accelerated, it has weakened in France to 4.1%, and the outcome in Germany is also projected to be lower at 2.7%.

Italian price increases are expected to decelerate markedly below the ECB’s goal, to 1.1%.

Friday may feature the release of several reports by ratings companies. Among them, S&P Global Ratings is scheduled to publish a view on France, and Scope Ratings could do the same for Italy. Meanwhile, the German government is struggling to hammer out a revised budget after a shock court ruling earlier this month.

In the UK, several Bank of England policymakers are due to make appearances, including governor Andrew Bailey, while it is a quieter week for UK data.

After Sweden surprised investors last week by halting rate increases, third-quarter GDP on Wednesday may reveal a recession.