His data inflation in Eurozone in January, due to be made public next week, may still be surprising for technical reasons. However, they are unlikely to change the overall picture. And this means that the peak of the index in the euro area and in most of its member countries, most likely, has already been passed. The shock of the war in Ukraine is now passing. The inflation rate jumped to double digits in most member states during 2022. The main factors are rising energy and food prices. Since the end of summer, prices, especially for natural gas, began to fall. Consumption-driven energy prices should ease first, while structural inflation is likely to have some room for further growth as the transfer of higher production costs from producers to consumers is not yet complete. Overall, we expect inflation to fall below 4% year-on-year through the end of 2023 and to 2.4% in 2024.

However, there are also differences across countries. The respective national statistical offices will release inflation data for January for the eurozone and its member states from Monday to Wednesday next week. Price dynamics are likely to differ between major countries. In particular, in Germany, with the help of a one-time intervention, the government repaid December household contributions for natural gas and heating. Due to technical factors, the full impact of this move is not reflected in the Statistical Office’s consumer price data. However, this is likely to have been a key factor in reducing the December inflation in Germany. The impact of the moratorium on rising electricity and natural gas prices, which went into effect this month (but will be applied only partially retroactively), is likely to be much smaller. Thus, inflation is likely to pick up again in January. Finally, in France, the government intervened early to limit the rise in household energy prices. However, in early 2023, natural gas limits starting in January and electricity prices starting in February will increase by 15%. The motor fuel discount of 10 cents/liter in December is not valid in January. In general, inflation in France is likely to accelerate at the beginning of the year.

* Mr. Salomon Fiedler is an economist at Berenberg Bank.