Flash EA inflation in Dec-22 confirmed last month’s break of the upwards trend with another substantial surprise. Germany paying its citizens’ utility bills drove the drop.
Energy and food prices were weaker than expected more broadly too. However, core pressures often surprised already-raised forecasts to the upside.
Further slowing in headline inflation is likely, despite a Jan-23 normalisation in German utility bills. The ECB will maintain its hawkish focus on excessive underlying pressures.
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