Research Briefing | Nov 18, 2021

Eurozone | Low-flation risks to come back to the fore in late-2022

Ipad Frame - Eurozone-Low-flation-risks-to-come-back-to-the-fore-in-late-2022

We see little evidence that the outlook for underlying inflation in the eurozone is much changed from a few months ago. In fact, there’s a high probability that low-flation will make a comeback next year. Thus, speculation of European Central Bank (ECB) hikes in late-2022 seems way off the mark.

What you will learn:

  • We have materially raised our near-term inflation views in recent months as energy prices surged more than expected and supply bottlenecks worsened. But we still forecast inflation next year slowing rapidly, heading towards 1% in Q4 2022, averaging 2.0% in 2022 and only 1.2% in 2023.
  • Surging durable-goods prices could continue to prop up core inflation in the near term.
  • Services inflation, which is a better gauge of demand and wage pressures, has picked up sharply.
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