| Consensus | Actual | Previous | |
|---|---|---|---|
| Month over Month | -0.4% | -0.5% | -0.4% |
| Year over Year | 0.8% | 0.7% | 0.8% |
Highlights
Italian inflation fell sharply in November, in line with other European countries, with revised data showing an even steeper decline than originally reported.
Consumer prices retreated by 0.5 percent last month, a bigger fall than the 0.4 percent decline (and consensus estimate) reported earlier this month. That took the annual rate down to 0.7 percent from 1.7 percent in October, a touch below the consensus estimate and flash reading of 0.8 percent.
While the headline inflation rate has fallen well below the European Central Bank's 2.0 percent target, largely due to the decline in energy prices, core inflation remains stickier, falling to 3.6 percent in November (unchanged from the flash estimate) from 4.2 percent in October.
Annual service price inflation declined to 3.7 percent from 4.1 percent in October, while goods prices fell by 1.4 percent on an annual basis after recording no change in the previous month.
Harmonised prices, which feed into revised eurozone inflation data due next week, fell by 0.6 percent in November, a steeper fall than the flash estimate of a 0.4 percent decline, taking the annual inflation rate to 0.6 percent, below the earlier reading of 0.7 percent.
Despite easing price pressures across the eurozone, European Central Bank President Christine Lagarde insisted on Thursday that rate setters must not drop their guard in the fight against inflation. The ECB left its main interest rates on hold at the December meeting, but Lagarde stressed that domestic inflation remains sticky, largely due to the strong labor market.
Lagarde made it clear that rate setters did not broach the topic of rate cuts when discussing policy, and earlier on Friday, governing council member Madis Muller head of the Estonian central bank said that talk of a first quarter rate cut is premature.
After such cautious comments, markets have dialed back on bets of an easing of policy in the early part of 2024, but are still factoring in a rate as soon as April.
The data take the Italian RPI to positive two and the RPI-P to 33 , suggesting that inflation is falling much more quickly than forecast, even as the broader economy is performing largely within expectations.
Consumer prices retreated by 0.5 percent last month, a bigger fall than the 0.4 percent decline (and consensus estimate) reported earlier this month. That took the annual rate down to 0.7 percent from 1.7 percent in October, a touch below the consensus estimate and flash reading of 0.8 percent.
While the headline inflation rate has fallen well below the European Central Bank's 2.0 percent target, largely due to the decline in energy prices, core inflation remains stickier, falling to 3.6 percent in November (unchanged from the flash estimate) from 4.2 percent in October.
Annual service price inflation declined to 3.7 percent from 4.1 percent in October, while goods prices fell by 1.4 percent on an annual basis after recording no change in the previous month.
Harmonised prices, which feed into revised eurozone inflation data due next week, fell by 0.6 percent in November, a steeper fall than the flash estimate of a 0.4 percent decline, taking the annual inflation rate to 0.6 percent, below the earlier reading of 0.7 percent.
Despite easing price pressures across the eurozone, European Central Bank President Christine Lagarde insisted on Thursday that rate setters must not drop their guard in the fight against inflation. The ECB left its main interest rates on hold at the December meeting, but Lagarde stressed that domestic inflation remains sticky, largely due to the strong labor market.
Lagarde made it clear that rate setters did not broach the topic of rate cuts when discussing policy, and earlier on Friday, governing council member Madis Muller head of the Estonian central bank said that talk of a first quarter rate cut is premature.
After such cautious comments, markets have dialed back on bets of an easing of policy in the early part of 2024, but are still factoring in a rate as soon as April.
The data take the Italian RPI to positive two and the RPI-P to 33 , suggesting that inflation is falling much more quickly than forecast, even as the broader economy is performing largely within expectations.
Market Consensus Before Announcement
No revisions are expected leaving a 0.4 percent monthly fall in prices and a 0.8 percent annual inflation rate, down from October's final 1.7 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.
