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Euro Area Inflation Eases: Anticipating ECB Rate Cuts in 2024

Inflation in the EuroArea softened more than expected from a year ago in November. The harmonized inflation index rose 2.4% yoy after 2.9% in October. Inflation has cooled sharply in recent months across the Euro Area following the sharp rate increases by the ECB and the energy price normalization. Germany's harmonized inflation is now at 2.3% yoy, France's at 3.8%yoy and Italy's at 0.7%yoy.

Given the fast approach of the 2% ECB target, markets are now pricing in more than 4 cuts for the ECB in 2024. Our take: Cuts are likely in 2024 but market pricing seems to be getting a bit ahead of itself.


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