| Consensus | Actual | Previous | |
|---|---|---|---|
| Month over Month | 0.3% | -0.1% | 0.2% |
| Year over Year | 2.2% | 1.8% | 5.3% |
Highlights
Italian inflation fell by much more than expected in October, a bit of good news for an economy that only just skirted recession in the middle two quarters of the year.
The consumer price index slid by 0.1 percent, according to flash data, confounding market estimates of a 0.3 percent gain after a 0.2 percent rise in September. That pushed the annual inflation rate to 1.8 percent, below the European Central Bank's two percent target.
Core inflation which has troubled the ECB of late remained above target but retreated to an annual rate of 4.2 percent from 4.6 percent in September. Service price inflation also closely monitored by the central bank steadied at an annual rate of 4.1 percent while goods inflation fell dramatically to 0.1 percent from 6.0 percent previously.
Base effects played a large part in the October inflation slowdown, after monthly CPI jumped by more than three percent a year ago. Non-regulated energy prices fell by an annual rate of 17.7 percent, after rising by 7.6 percent in September, while unprocessed food prices rose by 7.4 percent, down from 8.9 percent previously.
Harmonised prices, which fed into Eurozone data released earlier Tuesday, rose by 0.2 percent in October, taking the annual rate down to 1.9 percent from 5.6 percent in September. Across the bloc, the annual rate of HICP declined to 2.9 percent, well below the consensus forecast of 3.4 percent, although the narrow core rate was steady at 4.2 percent.
The unexpected fall in headline inflation is likely to reinforce the view that the ECB's rate-hiking cycle has come to an end. European Central Bank Vice President Luis de Guindos repeated the company line on Monday that, while inflation remains too high, rates have reached a level that, if maintained, will assist with bringing inflation back to target.
The latest data leave the RPI at minus 25 and the RPI-P at minus 19, meaning that the Italian economy is underperforming market expectations.
The consumer price index slid by 0.1 percent, according to flash data, confounding market estimates of a 0.3 percent gain after a 0.2 percent rise in September. That pushed the annual inflation rate to 1.8 percent, below the European Central Bank's two percent target.
Core inflation which has troubled the ECB of late remained above target but retreated to an annual rate of 4.2 percent from 4.6 percent in September. Service price inflation also closely monitored by the central bank steadied at an annual rate of 4.1 percent while goods inflation fell dramatically to 0.1 percent from 6.0 percent previously.
Base effects played a large part in the October inflation slowdown, after monthly CPI jumped by more than three percent a year ago. Non-regulated energy prices fell by an annual rate of 17.7 percent, after rising by 7.6 percent in September, while unprocessed food prices rose by 7.4 percent, down from 8.9 percent previously.
Harmonised prices, which fed into Eurozone data released earlier Tuesday, rose by 0.2 percent in October, taking the annual rate down to 1.9 percent from 5.6 percent in September. Across the bloc, the annual rate of HICP declined to 2.9 percent, well below the consensus forecast of 3.4 percent, although the narrow core rate was steady at 4.2 percent.
The unexpected fall in headline inflation is likely to reinforce the view that the ECB's rate-hiking cycle has come to an end. European Central Bank Vice President Luis de Guindos repeated the company line on Monday that, while inflation remains too high, rates have reached a level that, if maintained, will assist with bringing inflation back to target.
The latest data leave the RPI at minus 25 and the RPI-P at minus 19, meaning that the Italian economy is underperforming market expectations.
Market Consensus Before Announcement
A monthly surge in prices of more that 3 percent in October 2022 will ensure that annual inflation tumbles this month. The consensus for the provisional estimate is 2.2 percent, down from September's final 5.3 percent.
Definition
The consumer price index (CPI) is a measure of the average price level of a fixed basket of goods and services purchased by consumers. Monthly and annual changes in the CPI provide widely used measures of inflation. A provisional estimate, with limited detail, is released about two weeks before the final data are reported.
Description
The consumer price index is the most widely followed indicator of inflation. An investor who understands how inflation influences the markets will benefit over those investors that do not understand the impact. In countries such as the Italy where monetary policy decisions rest on the central bank's inflation target, the rate of inflation directly affects all interest rates charged to business and the consumer. As a member of the European Monetary Union, Italy's interest rates are set by the European Central Bank.
Italy like other EMU countries has both a national CPI and a harmonized index of consumer prices (HICP). Components and weights within the national CPI vary from other countries, reflecting national idiosyncrasies. The core CPI, which excludes fresh food, is usually the preferred indicator of short-term inflation pressures.
Inflation is an increase in the overall prices of goods and services. The relationship between inflation and interest rates is the key to understanding how indicators such as the CPI influence the markets - and your investments. As the rate of inflation changes and as expectations on inflation change, the markets adjust interest rates. The effect ripples across stocks, bonds, commodities, and your portfolio, often in a dramatic fashion.
By tracking inflation, whether high or low, rising or falling, investors can anticipate how different types of investments will perform. Over the long run, the bond market will rally (fall) when increases in the CPI are small (large). The equity market rallies with the bond market because low inflation promises low interest rates and is good for profits.
Italy like other EMU countries has both a national CPI and a harmonized index of consumer prices (HICP). Components and weights within the national CPI vary from other countries, reflecting national idiosyncrasies. The core CPI, which excludes fresh food, is usually the preferred indicator of short-term inflation pressures.
Inflation is an increase in the overall prices of goods and services. The relationship between inflation and interest rates is the key to understanding how indicators such as the CPI influence the markets - and your investments. As the rate of inflation changes and as expectations on inflation change, the markets adjust interest rates. The effect ripples across stocks, bonds, commodities, and your portfolio, often in a dramatic fashion.
By tracking inflation, whether high or low, rising or falling, investors can anticipate how different types of investments will perform. Over the long run, the bond market will rally (fall) when increases in the CPI are small (large). The equity market rallies with the bond market because low inflation promises low interest rates and is good for profits.
