(Bloomberg) — Inflation in the eurozone remains at a historically high level, but consumer expectations about how prices will go are well below long-term levels.
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European Commission data show that three countries – Germany, Italy and Spain (three of the top four countries in the currency bloc) – expect inflation fears next year to be close to their average since the introduction of the euro in 1999, or below average.
This is comforting to the European Central Bank, which has sought to keep expectations about future prices well-founded, and on Thursday released a monthly survey of the opinions of the region’s 350 million citizens. intend to do something.
But while encouraged by the improvements uncovered by the European Commission, inflation is far from policymakers’ comfort zones. For example, in France, consumers are more concerned about prices than usual. So is Croatia, which joined the Euroclub in January.
So even if inflation returns to single digits and natural gas prices plummet, interest rates will still have to rise significantly, officials said. Here’s what’s impacting the inflation outlook for the eurozone’s largest economy and its newest members:
A century after hyperinflation ravaged the economy, fear of rising prices remains part of the DNA of many Germans, with average levels of concern higher than in most European countries. It explains why it’s so expensive. The government’s petrol price cap has taken the pain out of the latest inflationary episode, where prices have risen above his 11% mark. Countermeasures are limited, but unusually warm winter weather also helps.
Consumers are benefiting from the support of Europe’s most generous nation to offset skyrocketing energy prices. But as the government scrapped petrol and diesel discounts and tightened restrictions on household price increases, concerns are mounting heading into 2023.
Inflation is the fastest in the region, but Italians are more concerned about the impact of higher ECB interest rates on economic growth and the state’s ability to finance its huge public debt. The new government, led by right-wing Prime Minister Giorgia Meloni, has spent around 75 billion euros to protect homes and businesses from the worst of energy price hikes, including tax cuts and fuel discounts at pumps.
Spain has announced a new set of measures worth €10bn to maintain downward pressure on prices in 2023 after inflation eased sharply in recent months. At the turn of the year, Prime Minister Pedro Sánchez scrapped high fuel subsidies but introduced new tax cuts on staple foods to ease food inflation, which has hovered around 15%. His government also maintained a series of energy tax cuts and plans to ask Brussels to extend the gas price cap on the Iberian Peninsula.
The adoption of a common currency this month has prompted some retailers and service providers in the euro zone, the 20th member of the euro zone, to raise prices, raising consumer concerns. Prime Minister Andrei Plenkovic last week urged companies to bring prices back to December levels, threatening unspecified sanctions if they did not comply.
— With contributions from Alessandra Migliaccio, Jasmina Kuzmanovic, Alonso Soto, and William Horobin.
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