European Central Bank: Gradual tightening path – Nordea
Nordea’s report highlights that Euro-area headline inflation rose to 4.0% in October, driven largely by energy and a rebound in food prices. Core inflation stayed at 2.5%, with modest second-round effects so far. Nordea expects two more ECB rate hikes, noting downside risks from tighter financing conditions and weaker economic activity but still seeing a clear case for gradual tightening.
Nordea's report highlights a gradual tightening path by the European Central Bank (ECB). Euro-area headline inflation reached 4.0% in October, primarily due to rising energy prices and a resurgence in food costs. Despite core inflation remaining steady at 2.5%, both services prices (3.3%) and non-energy industrial goods prices (1.2%) showed slight acceleration.
The ECB maintains the expectation of two additional rate hikes, considering factors like tighter financing conditions and weaker economic growth, while still considering a gradual tightening approach. Inflation remains driven largely by energy costs, which have surged by 20.8% year-over-year, accounting for roughly half of headline inflation.
A rebound in food prices may signal early second-round effects from high energy prices. While tighter financing conditions and weaker economic development pose downside risks, the overall case for further hikes remains clear for now.
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