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Inflation, data from Germany and Italy justify the ECB

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Inflation, data from Germany and Italy justify the ECB

In Italia the pressure on prices eases in January, in Germania it dates back but still follows expectations. Signals that theeurozone inflation is solid and persistent, and that somehow justify the aggressive monetary policy from the BCEwhich should implement at least two more hikes in 2023. Federico Vetrella, Market Strategist of IG Italia, analyzes the data and perspective.

Data from Italy

In the beautiful country theState (National Institute of Statistics) released the data relating to inflation in the month of January. The consumer price index indicates a slowdown to +10% on an annual basis (preliminary estimates at +10.1%) compared to +11.6% y/y the previous month. On a monthly basis, the increase was equal to +0.1% against estimates fixed at +0.2%. At the harmonized level, however, the CPI fell to +10.7% y/y (more than expected at +10.9% y/y) compared to +12.3% y/y in December while month-on-month it dropped by -1.5%.

L’State announces that the decline in the CPI is mainly due to the decline in prices of the beni energetic regulated (from +70.2% to -12%) and unprocessed food (from +9.5% to +8%) whose effects were however partially offset by the acceleration of prices in durable goods (from +6, 4% to +6.8%) and in non-durable ones (+6.1% to +6.7%). Core inflation, which excludes energy and unprocessed food, rose to +6% y/y versus +5.8% y/y previously. That net of energy alone remained stable at +6.2% y/y.

German results

This morning You are ready (Statistisches Bundesamt) has released its inflation data in Germania in January which were up on the previous month but in line with forecasts. The CPI (Consumer Price Index) on an annual basis rose to +8.7% while the December figure was revised to +8.1%. On a monthly basis, the increase was +1% compared to the previous -0.8%. Harmonized inflation instead indicated an increase to +9.2% y/y, down on the +9.6% y/y in December while the month-on-month increase was +0.5%.

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possible evolution

I data on the consumer price index in Germania e Italia indicate that theinflation remains more solid of market forecasts. In Germany, inflationary pressures continue to remain high due to high energy and food prices, while CPI growth has also spread to other categories of goods. In Italy, on the other hand, the drop in inflation is due to the reduction in the prices of energy raw materials despite the data showing a slight increase in the core component, an indication that the pressure on prices has entrenched itself within the economy. In light of this, the aggressive attitudes of the European Central Bank remain entirely justified. Governor Christine Lagarde has repeatedly reiterated the Frankfurt institute’s willingness to continue raising interest rates to curb the growth of inflation and bring it back to around +2% y/y, a level considered not harmful to the economy.

Second the expert the IG, today’s data indicate that the fight against inflationary pressures is far from won and this could lead to further tensions on the financial markets. There BCE it will continue with a rise in interest rates for at least the next two meetings to then evaluate a possible stop in order to observe the effects on the economy.

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