During the press conference following the latest governing council meeting, Christine Lagarde insisted repeatedly that moving to a 50 bp rate hike versus 75 bp previously did not represent a pivot, adding that rates still have to rise significantly and at a steady pace. Consequently, the likelihood of a terminal rate higher than 3.00% has increased, which explains the jump in bond yields. The large upward revision of the inflation projections is probably another factor behind the hawkish message. Forecasting inflation several years into the future is a difficult task, even more so in the current environment
In its second estimate, the Spanish statistical institute (INE) raised slightly the harmonised inflation rate (HICP) for November from 6.6% y/y to 6.7% y/y. This is still a significant decline from the 10.7% y/y figure reported in July, as Spain now reports the smallest rate of inflation in the Eurozone.
Confidence amongst Japanese consumers fell sharply this autumn, reflecting the difficulties they are experiencing in the face of inflation rising to its highest level for more than thirty years (3.8% y/y in October). According to the Cabinet Office, consumer confidence has fallen back to its level from the summer of 2020, when the pandemic was in full swing.
UK inflation finally fell in November to +10.7% y/y (+0.4% m/m), compared with +11.1% in October (+2% m/m). Other good news is that core inflation is also falling, for the first time since September 2021 (-0.2 points, i.e. 6.3% y/y). In the face of still very high inflation, however, the Bank of England (BoE) Monetary Policy Committee (MPC) decided to raise its key rate further by 50 basis points, thus bringing it to 3.5%. The rise is less significant than in November (+75 bp) as the BoE must also reconcile it with the risk of recession.
3.9 million new cases were counted between 7 and 13 December, compared with approximately 3.6 million the previous week, representing an increase of 8.3%. This is the fifth consecutive week of rising infections, a development that is all the more noteworthy as all regions reported an increase in weekly cases, with the exception of Africa, which reported a fall of 17%.
