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Central Banks Caution Against Declaring Victory Over Inflation

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Eurozone Market Update

In November, eurozone inflation was 2.4% year-over-year, below expectations of 2.7% and October’s 2.9%. Core inflation, which excludes more volatile food and energy prices, fell to 3.6% from 4.2% in October, thanks to the continuing decline in energy prices. Despite this trend, ECB President Christine Lagarde stated, “It is not time to start declaring victory on inflation.” But markets are still moving forward with their forecast of 113 basis points (bps) in cuts by the end of 2024. Q3 GDP for the eurozone came in at -0.1%, missing market expectations of 0% and reflecting the region’s stagnating economy. Monthly retail sales fell 0.5%, in line with the depressed consumer confidence levels, allowing the market narrative to persist that the ECB is most likely done with hiking rates.

Source: Bloomberg, data as of 30 November 2023