Eurozone HICP Preview: Forecasts from seven major banks, inflation behind us?

Eurostat will release the Eurozone Harmonised Index of Consumer Prices (HICP) data for January on Wednesday, February 1 at 10:00 GMT and as we get closer to the release time, here are the expectations forecast by the economists and researchers of seven major banks regarding the upcoming EU inflation print.

Headline is expected at 9.1% year-on-year vs. 9.2% in December, while core is expected at 5.1% YoY vs. 5.2% in December. On a monthly basis, the HICP in the old continent is expected to fall by -0.3% in the reported period while the core HICP is also down by -0.2%.

“The ECB expects the rate to rise again in January. In fact, however, it is likely to remain at 9.2%. As is often the case at the beginning of a year, the inflation rate for January 2023 will also be influenced by a number of special factors. This time, various measures taken by governments to curb the rise in energy prices complicate matters further, in addition to the usual update of the goods basket. Although some effects dampening the rise in energy prices lost influence, the contribution of energy prices to the overall inflation rate is unlikely to increase much. The same applies to food prices. By contrast, the inflation rate excluding energy, food, alcohol and tobacco is likely to have fallen slightly from 5.2% to 5.1%. However, this decline is solely attributable to the change in the basket of goods. There can therefore be no talk of a weakening of underlying inflation.”

“We look for an uptick both in headline (9.6%; from 9.2%) and core (5.4%, from 5.2%) terms.”

“We forecast a large fall in the annual rate of euro area inflation in January from 9.2% to 8.4%.”

“New energy subsidies likely pulled down German headline HICP for the third consecutive month. Combined with further household support in the Netherlands and the impact of lower wholesale energy prices, this should push EZ headline inflation down to 8.4% YoY. Core is what will matter for the ECB though, and here we see no indication of a softening of the recent strong momentum.”

“The euro area January flash HICP is likely to print down 0.4pp at 8.8% YoY, with core 0.2pp lower at 5.0% YoY, temporarily dragged down by the annual weighting changes.”

“HICP Inflation, January: Citi Forecast 8.9% YoY, Prior 9.2% YoY; Core Inflation, January: Citi Forecast 5.3% YoY, Prior 5.2% YoY.”

“We expect Eurozone HICP to decline to 8.4% in January and continue falling to c.3.5% in Q4 this year. Core inflation is seen staying in a 5.0-5.5% range throughout the first half of this year.”