Headline annual inflation in the Eurozone is expected to fall for the fourth straight month in January, but preliminary data from Germany, France, and Spain showed a rise in consumer prices that could push the overall rate for the currency area above forecasts.

On Wednesday, an economists’ poll predicted a decline in annual inflation to 8.2% from the 8.6% reading in January. The core rate was expected to hold at the 5.3% record high set in the first month of this year.

But those predictions were out before Europe’s largest economy reported preliminary inflation data: Germany said Wednesday that EU-harmonised inflation last month rose to 9.3%, an unexpected increase that surpassed the 9.0% estimate and the 9.2% rate reported in January.

France, the Eurozone’s second-largest economy, said Tuesday morning in a preliminary report that its EU-harmonised inflation rate rose to 7.2%, the highest mark since the euro was introduced in 1999. Last month’s consumer price growth outpaced the market estimate of 7.0%, which was the reading in January.

Earlier Tuesday, Spain, the euro area’s fourth-largest economy, said its EU-harmonised inflation rate rose to 6.1% to exceed January’s 5.9%.

However, even though these France and Spain reported higher-than-expected consumer price growth in January, the overall number for the Eurozone fell as expected.

Italy is scheduled to release its February inflation data concurrently with the Eurozone numbers on Thursday. (LiveSquawk - Continue Reading)

German inflation surprisingly accelerated in February, further complicating the European Central Bank’s task after overshoots this week in other parts of the continent. 

Consumer prices advanced 9.3% from a year ago, up from January’s 9.2% gain, driven by services and food costs. The move came even as Germany moved to limit household heating bills that rocketed because of Russia’s war in Ukraine.

Analysts in a Bloomberg survey had expected a slowdown to 9%.

The reading for Europe’s biggest economy puts more pressure on the ECB after French inflation hit a euro-era record and Spanish price growth defied estimates to moderate. That prompted markets for the first time to price a 4% peak in the ECB’s deposit rate, which currently stands at 2.5%. (Bloomberg - Continue Reading)

Federal Reserve officials said interest rates will need to increase further and stay elevated into next year to curb US inflation that’s showing few signs of abating despite the central bank’s most aggressive monetary tightening in a generation. 

Interest rates would need to rise to between 5% and 5.25% and then remain there “until well into 2024,” Atlanta Fed President Raphael Bostic wrote in an essay published Wednesday. “This will allow tighter policy to filter through the economy and ultimately bring aggregate supply and aggregate demand into better balance and thus lower inflation.” 

Bank of Minneapolis President Neel Kashkari has yet to decide if he will back accelerating the central bank’s interest-rate increases when officials meet later this month, amid signs inflation is not cooling as hoped.

“I’m open-minded, at this point, about whether it’s 25 or 50 basis points,” Kashkari said Wednesday in a question-and-answer session in Sioux Falls, South Dakota. “To me, much more important than whether it’s 25 or 50 is what we signal in what’s called the dot plot,” he added, referring to the Fed’s quarterly forecast for the path of its benchmark policy rate. (Bloomberg - Continue Reading)