“Core inflation in the eurozone continues to rise, reaching 6% year-on-year in August 2022. Its acceleration is inevitable. Therefore, the European Central Bank (ECB) will have to decide whether to tolerate core inflation remaining high until 2024 or to switch to a much tighter monetary policy than currently expected.“, according to Natixis analysts.
Core inflation persists
“The ECB can no longer say that core inflation will decline rapidly, due to its inertia. If core inflation is above 6% at the beginning of 2023, the inertia of this inflation will take it to around 6% at least in early 2024.”
“The econometric analysis shows that core inflation is perfectly inert (core inflation has an eigenvalue of 0.98). Therefore, the ECB will have to accept: Either core inflation of around 6% at least in 2024; Or a tighter monetary policy than currently expected.”
Source: Fx Street
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