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Inflation rate in the euro zone drops to 10% as the rise in energy prices slows

According to preliminary data released on Wednesday, inflation in the euro zone moderated marginally in November as prices fell from record highs and underperformed analyst projections.

The 19-member region’s consumer prices have been extremely high for some time. The seriousness of the cost-of-living issue in the EU was shown last month by inflation rising above the 10% threshold.

According to preliminary data released on Wednesday by Europe’s statistics office, headline inflation was 10% on an annual basis this month, down 0.6 percentage points from October.

Food and energy both continued to contribute significantly to the high inflation rates, but the former was down significantly. According to Eurostat, energy is predicted to have increased at an annual pace of 34.9% in November compared to 41.5% in October.

According to Andrew Kenningham, chief economist for Europe at Capital Economics, “the reduction in headline HICP inflation from 10.6% in October to 10.0% in November was the first decline since June 2021 and was a bigger fall than originally projected.”

Given the unpredictability of the monthly data, “we would not be shocked to see the headline inflation rate climb again in December or January, but there is little doubt that it will reduce swiftly next year,” he continued. Peak inflation was “within grasp,” an ECB member told CNBC earlier this month. The Bank of Malta’s governor, Edward Scicluna, exclusively told CNBC that he did not anticipate a recurrence of the recent rate increase of 75 basis points.

Rates are predicted by the market to rise by 50 basis points in December.

Lower inflation rates may be a result of recent interest rate increases and may indicate fewer or smaller rate increases in the months to come. However, ECB President Lagarde foresaw future adjustments to its base rate in remarks made earlier this week.

She told European parliamentarians, “We plan to hike rates further to the levels needed to ensure that inflation returns to our 2% medium-term target in a timely way.”Three rate increases have been made by the central bank this year, and a fourth is anticipated in December. How many rate increases the ECB will announce in 2019 is, however, extremely unpredictable.

While some economists contend that policymakers must take a break to give the real economy time to adjust to the higher rates, others contend that inflation is so high that more rate increases are necessary. In September, the European Central Bank (ECB) predicted that annual headline inflation would reach 8.1% in 2022 and 5.5% in 2023. When the central bank meets in December, these numbers are anticipated.