| Consensus | Actual | Previous | |
|---|---|---|---|
| Month over Month | -0.1% | -0.2% | -0.1% |
| Year over Year | 1.8% | 1.7% | 1.8% |
Highlights
October inflation retreated by more than originally reported 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 0.2 percent, according to revised data released on Wednesday, exceeding the flash estimate of a 0.1 percent fall. That pushed the annual inflation rate down to 1.7 percent, below the initially reported 1.8 percent rise and well below the September result of 5.3 percent. The October result takes inflation below the European Central Bank's two percent inflation target.
A sharp fall in energy prices accounted for much of the fall in headline inflation; non-regulated energy inflation declined by an annual rate of 17.7 percent, after a 7.6 percent rise in September. Food price inflation also declined but remained elevated with unprocessed food prices increasing by an annual rate of 4.9 percent, compared to September's 7.7 percent gain.
Core inflation declined less dramatically, falling to an annual rate of 4.2 percent from 4.6 percent in September. Services inflation a concern for central bankers steadied at an annual rate of 4.1 percent.
Harmonised prices, which feed into eurozone data, rose by 0.1 percent in October, below the originally reported 0.2 percent rise. That took the annual rate down to 1.8 percent from 5.6 percent in September, and below the initial estimate of 1.9 percent.
The steeper-than-expected fall in headline inflation supports the market view that European interest rates have reached their peak, despite stubborn price pressures in the service sector. Various European Central Bank officials have repeated the company line that policy has become sufficiently restrictive if maintained to return inflation to the bloc's two percent target. Updated October eurozone inflation data are due on Friday.
The latest data take the Italian RPI to minus 32 and the RPI-P to minus 19, meaning the economy is underperforming expectations.
The consumer price index slid by 0.2 percent, according to revised data released on Wednesday, exceeding the flash estimate of a 0.1 percent fall. That pushed the annual inflation rate down to 1.7 percent, below the initially reported 1.8 percent rise and well below the September result of 5.3 percent. The October result takes inflation below the European Central Bank's two percent inflation target.
A sharp fall in energy prices accounted for much of the fall in headline inflation; non-regulated energy inflation declined by an annual rate of 17.7 percent, after a 7.6 percent rise in September. Food price inflation also declined but remained elevated with unprocessed food prices increasing by an annual rate of 4.9 percent, compared to September's 7.7 percent gain.
Core inflation declined less dramatically, falling to an annual rate of 4.2 percent from 4.6 percent in September. Services inflation a concern for central bankers steadied at an annual rate of 4.1 percent.
Harmonised prices, which feed into eurozone data, rose by 0.1 percent in October, below the originally reported 0.2 percent rise. That took the annual rate down to 1.8 percent from 5.6 percent in September, and below the initial estimate of 1.9 percent.
The steeper-than-expected fall in headline inflation supports the market view that European interest rates have reached their peak, despite stubborn price pressures in the service sector. Various European Central Bank officials have repeated the company line that policy has become sufficiently restrictive if maintained to return inflation to the bloc's two percent target. Updated October eurozone inflation data are due on Friday.
The latest data take the Italian RPI to minus 32 and the RPI-P to minus 19, meaning the economy is underperforming expectations.
Market Consensus Before Announcement
No revisions are expected leaving a 0.1 percent monthly fall and a 1.8 percent annual inflation rate, the latter 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.
