Inflation in the euro zone falls and reinforces hopes of a slowdown in interest rates

Eurozone inflation eased much more than expected in November, raising hopes that strong price growth has already passed its peak and reinforcing expectations of a slowdown in European Central Bank (ECB) rate hikes in the next month.

Consumer prices in the 19 countries that adopt the euro have risen 10.0% this month, after rising 10.6% in October, well below expectations of 10.4% in a Reuters poll of analysts.

The bigger picture is more nuanced, however, as energy prices accounted for most of the slowdown, while food price inflation, a key concern, continued to accelerate, Eurostat data showed on Wednesday. (30).

With inflation at more than five times its 2% target, the ECB has raised interest rates at their fastest pace on record this year and a series of hikes in the coming months is still likely.

But after back-to-back moves of 75 basis points, some policymakers have recently advocated a 50 basis point hike on Dec. 15, arguing that inflation is finally peaking and the ECB has made enough progress to justify more measures modest .

While the drop in the inflation rate, the first for the euro zone in over a year, strengthens the case for more measured ECB action next month, Wednesday’s data could also stoke fears that inflation will prove itself. more persistent than expected.

Underlying price growth, which excludes volatile food and energy prices, remained strong, which is likely to trigger warnings from conservative central bankers, while rising food prices, a top concern for governments, show little sign of peaking.

Excluding food and fuel costs, inflation rose from 6.4% to 6.6%, bucking expectations for a decline, while an even narrower measure, which also excludes alcohol and tobacco, held steady at 5.0 %.

Inflation for processed foods, alcohol and tobacco, a key category, accelerated from 12.4% to 13.6%.