Eurozone inflation growth slows

Euro climbs post-inflation data

By Raed Alkhedr | @raedalkhedr | 19 December 2023

Market close
  • Eurozone CPI up by 2.4%

  • Canada's inflation stability defies expectations

  • Canadian Dollar gains on major currencies after data release

Eurozone's November consumer price index shows deceleration

In a significant development, the Eurozone's Consumer Price Index (CPI) witnessed a deceleration in November. According to data released on Tuesday, the inflation rate slowed, with the CPI registering a year-on-year increase of 2.4%, a dip from the previous 2.9% rise. When food and energy are excluded, the inflation rate held steady at 3.6%.

This slowdown signals the European Central Bank's (ECB) effectiveness in managing inflation, following over a year of assertive monetary tightening aimed at inflation control. Consequently, there is a growing anticipation that the ECB might be nearing the apex of its monetary tightening phase. This comes in the wake of the U.S. Federal Reserve's similar approach, as inflation edges closer to the target rate of 2%.

The ECB's potential shift in policy was further hinted at by ECB member Villeroy, who recently suggested the nearing end of the interest rate hike cycle and the possibility of a rate reduction in 2024.

Following the data release, the Euro experienced an uptick against the U.S. Dollar, climbing from 1.0940 to around 1.0990.

Canadian inflation rates exhibit unexpected stability

Contrary to forecasts, Canada's inflation rate demonstrated unexpected stability. The CPI rose year-on-year by 3.1%, exceeding the predicted slowdown to 2.9%. On a monthly scale, the CPI saw a modest 0.1% increase, defying expectations of a 0.1% decline.

The slowdown in food price growth was offset by marked improvements in oil services and airline ticket prices. Despite these changes, the overall inflation rate is in line with the Bank of Canada's projections. The Bank anticipates inflation to stabilize near 3.5% until mid-2024, before a gradual decline to 2% by the end of 2025.

In its recent meetings, the Bank of Canada maintained interest rates at a 22-year high of 5%. The Bank emphasized that it is too early to consider changes in monetary policy or interest rate reductions, given that inflation rates are still below the desired threshold.