Peak inflation in Europe ‘is almost within reach,’ European Central Bank member says

Inflation in the euro zone remains well above the ECB’s target, as energy and food prices rise.

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Peak inflation “is almost at hand” in the euro zone, a member of the Governing Council of the European Central Bank told CNBC Thursday.

The euro zone has been fighting against rising inflation for about a year, and Russia’s invasion of Ukraine accentuated these inflationary pressures. In September 2021, headline inflation in the euro area stood at 3.4%, representing a 13-year high. These numbers have, however, moved rapidly higher with headline inflation hitting a historic high of 10.7% last month.

But a member of the ECB believes that price growth could be on the way down.

Peak inflation is “almost within reach,” Edward Scicluna, who is also Governor of the Bank of Malta, told CNBC exclusively. He warned, however, that there is a lot of uncertainty and that the central bank remains data dependent.

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The European Central Bank will release new economic forecasts in mid-December when it gathers for another rate decision. Back in September, the central bank predicted an annual inflation rate of 8.1% this year and 5.5% for 2023. The mandate of the ECB is to work towards a core inflation of 2%.

“The fact that the United States and Germany are mentioning the word ‘peace,’ not that it will happen tomorrow, but the fact that investors hear this word is a positive event in itself,” the former official said, referring to Russia -. Ukraine war, which could be a possible reason for fresh price rises.

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US officials have called on Ukraine to show its openness to a diplomatic resolution of the conflict. Earlier this week, President of Ukraine Vladimir Zelenskyy outlined five conditions for peace negotiations with Russia.

Any end to the conflict, which began when Russia invaded on February 24, would help with food supplies and prices, for example. In addition, energy prices in recent months have remained somewhat stable and far from the historic highs seen in August. Soaring energy costs have been the main driver of higher inflation across the euro zone.

Given the historic levels of inflation, the ECB has announced three rate hikes this year, bringing the main rate out of negative territory to 1.5% now. Market players have priced in another rate hike for December.

The Board of Governors raised rates by 75 basis points in both September and October, with markets expecting an increase of 0.5% for December.

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“As of today, I don’t see a repetition of the previous rate hike,” Scicluna said, suggesting that market expectations are now in line with some of the thinking inside the euro zone’s central bank.

Earlier this month, ECB President Christine Lagarde said her team needed to keep raising rates despite the economic slowdown. “We will have more rate increases in the future,” Lagarde said in an interview with Latvian news outlet Delfi.

In the United States, the consumer price index rose less than expected in October, according to data released Thursday. The latest print suggests that although inflation is still high, it may have started to cool down.

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