The latest CPI figures reflect easing energy and food price inflation, although Eurozone economic activity continues to disappoint.
The preliminary estimate of EU year-on-year inflation softened to 2.9% in October, against the previous month’s reading of 4.3%, and was below expectations of 3.1%. The softening in the inflation rate to the lowest level in over two years was down to an easing in energy costs and declining food price inflation. Stripping out these two inputs, core inflation also fell to 4.2% annualised, down from 4.5% the previous month.
This good news was sadly negated by data that showed economic output for the Eurozone fell by 0.1% in the third quarter. The medicine of raising interest rates to combat high inflation has gone past the point of pain relief now to actually start to hurt the patient. It’s for this reason the European Central Bank stood pat at last week’s committee meeting and will likely now have completed their policy hiking.
The information in this document is given for information purposes only and does not qualify as investment advice. Opinions and assessments contained in this document may change and reflect the point of view of GAM in the current economic environment. No liability shall be accepted for the accuracy and completeness of the information. Past performance is not an indicator for the current or future development.