Filenews 18 November 2022 - by Theano Thiopoulou
Yesterday's announcement of the harmonized consumer index by the Statistical Office and Eurostat, for October, did not hide any surprise about differences in the percentages from those announced a few days ago. In the Eurozone, record inflation of 10.6% is recorded and in Cyprus it is at 8.6%. At the same time, according to the same data, the annual inflation of the European Union stood at 11,5% in October 2022, from 10,9% in September.
There are now two crucial dates: 30 November, when the next Eurostat inflation data will be announced for the current month. The level of the rate of increase in prices will be important for the decision of the ECB's Governing Council on 15 December, when it will be decided how much the new increase in interest rates will be.
This means two things for consumers. If inflation rises further, to an alarming degree, they will have to deal with even greater accuracy and will have to pay even larger loan instalments, due to the rise in interest rates.
Yesterday's Bloomberg report says that a consensus is being formed to raise the European Central Bank's interest rates by 50 basis points. But if inflation in the Eurozone continues to rise dangerously in November, there could be a new consensus to raise interest rates by 75 basis points for the third time in a row.
The reasons that currently lead ECB officials to consider reducing the rate of interest rate increases are the peak of the risk of a recession, the possibility of inflation falling from the 10.7% jump in October and the fact that, with a half-point increase, the deposit rate will rise to 2%, a level that is close to the so-called neutral level; which does not enhance economic activity. "The ECB's reluctance to proceed with another 75 basis point increase in interest rates probably reflects a change in the balance of risks. The economy is slowing down quickly and inflation is likely to peak at the end of the year. Our view is that a 50 basis point increase is likely in December, we also see bond yields peaking at a level lower than markets expect," said Bloomberg Economics' chief economist for Europe.
The next inflation data will be important for the ECB's decision in December, ECB Vice-President Luis de Guidos said, while avoiding mentioning the size of the next interest rate hike. He warned that inflation would remain high in the first quarter of 2023.
