**As seen in Risk In The Week report 02/24/23, cablefxm.co.uk/reports
We recently received the final numbers for January EU CPI figures. Headline prices came in at 8.6% Y/y, which was faster than the prior and in line with the Eurostat preliminary figures. The core release printed at a fresh record high of 5.3% Y/y, above the estimate of 5.2%. On a monthly basis, food prices accelerated by 1.4%, energy increased by 0.6%. Services posted a decline of 0.1% M/m and translated to a 4.4% Y/y, unchanged from the prior. While the inflation remains elevated, both headline and core posted declines on a month-over-month reading, the latter fell by 0.8%, this was the largest drop recorded since January 2022. Analysts at ABN AMRO expect headline inflation to continue to decline in the coming months, see prices at around 2% by end of this year. However, they expect core inflation to be more sticky, and see core CPI to be higher than the headline by end of year. ABN AMRO maintained its forecast for peak rates at 3.0% and see the ECB delivering a final 50bps rate hike in March, but warned that the pace could slow down to 25bps in case the ECB need to move into further restrictive territory. The desk at Deutsche Bank lifted its forecast for a terminal rate of 3.75% from a prior projection of 3.25%, they now see 50bps rate hikes delivered both in March and May and a 25bps hike in June. Deutsche Bank revised its outlook on a stronger European economy and a resilient labour market.
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