Intesa Sanpaolo: FOMC: The Committee recognizes that upward price pressures could persist longer than expected and paves the way to be ready for an earlier rate lift-off, with a steeper path in 2022, should the economic outlook require it.
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Weekly Economic Monitor – 05 November 2021
Intesa Sanpaolo – Research Department
Euro area: average annual inflation to stay well above the ECB’s target in 2022 . Euro area inflation showed a further rise in October, to 4.1% y/y. While the surge is still likely to prove transitory, we believe it will not be short-lived. Thus, we revise our forecast profile further upwards: the annual average is now estimated at 2.5% in 2021 and 2.6% in 2022. The inflation trend should turn downwards next year, possibly peaking at 3.5% in February and hitting a low in December (at 1.5%). Uncertainty remains high and mostly tied to the more volatile component of the index: energy.
The week’s market movers
In the euro area , the first confidence survey for November, the German ZEW, should report a further decline of the sentiment in terms of both expectations and current views. Data on industrial activity in September are expected to outline a modest decline of output in Italy, and a marginal increase in the Eurozone as a whole, showing that the sector is still being held back by supply-side bottlenecks. In Germany, the final estimate of the consumer price index should confirm the acceleration of inflation in October, while the EU commission will publish the update of the autumn macroeconomic forecasts.
This week’s data releases in the United States will be few but important. The October PPI and CPI should in fact provide further confirmation of the persistence and diffusion of inflation pressures, not only in the sectors directly hit by the pandemic, but in most other spending categories as well, both in the goods and services sectors. The CPI is forecast to rise by 0.5% m/m, with the core component rising sharply again (0.3% m/m) as a result of solid increases in the shelter, restaurants, autos, and discretionary consumer goods items. Consumer confidence should worsen in November, outlining persistently high inflation expectations.
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