Preliminary data published by Eurostat showed that the eurozone annual inflation accelerated in November, confirming market expectations and preliminary estimates, as well as reaching the highest level since July. Meanwhile, core inflation has unexpectedly stabilized.
According to the report, the consumer price index rose by 2.3% per year, as expected, after increasing by 2.0% per year in October. Inflation mostly rose on a statistical base effect, as last year's exceptionally low figures were knocked out of the time series, replaced by still relatively modest, but somewhat higher figures. Meanwhile, on a monthly basis, the consumer price index fell 0.3%, offsetting the September increase (+0.3%). Economists had expected a 0.2% increase.
Eurostat reported that the core consumer price index - excluding energy, food, alcohol & tobacco - rose by 2.7% per year, as in October. Consensus estimates suggested an increase of 2.8%.
The data showed that the annual growth of the overall consumer price index was due to an increase in the cost of services (+3.9% vs. +4.0% in October), food, alcohol & tobacco (+2.8% vs. +2.9%) and non-energy industrial goods (+0.7% vs. +0.5%). Meanwhile, energy prices fell by 1.9% after declining by 4.6% in October.
Overall, today's data does little to alter the overall picture, so further rate cuts remain warranted. But the key question for now is whether a 0.25% move on Dec. 12 is enough. Markets fully price in a smaller cut but see less than a 10% chance of a bigger, 50 basis point move now.