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.