There has been a further slight improvement in prospects for the euro-zone in recent weeks. Business surveys suggest that activity is no longer contracting sharply, headline inflation seems to be past its peak, and wholesale gas prices have plunged. However, the economy probably shrank in Q4 and the near-term outlook is still poor, not least because of the impact of tighter monetary policy. What’s more, underlying price pressures remain intense. The core inflation rate rose in December and looks set to stay well above 2% this year. We expect the ECB to raise its deposit rate further in the coming months, but to a peak of 3% rather than the 3.5% priced in by financial markets.
Drop-Ins – The World In 2023 (10-11 January): Will 2023 be another rollercoaster year for economies and markets? Join our senior economists for these special briefings on 10th and 11th January to find out what to expect in the coming 12 months. Register now.
Become a client to read more
This is premium content that requires an active Capital Economics subscription to view.
Already have an account?
You may already have access to this premium content as part of a paid subscription.
Sign in to read the content in full or get details of how you can access it
Register for free
Sign up for a free account to:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services