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Inflation data in Europe points to some kind of stabilization

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(Kitco News) - Inflation data in Europe has flatlined slightly and this could keep some of the pressure at bay for the ECB and BoE. Many analysts have started to pice in rate hikes for the BoE as Bank's governor, Andrew Bailey, gave his strongest hint yet that the Bank rate is set to rise from 0.1%, where it has sat since March last year. He said that he and his colleagues on the monetary policy committee (MPC) would "have to act" in response to surging inflation.

In this latest report, the ONS report said the largest upward contribution to the September 2021 CPIH 12-month inflation rate came from transport (0.91 percentage points) with further large upward contributions from housing and household services (0.69 percentage points), restaurants and hotels (0.34 percentage points), and recreation and culture (0.31 percentage points).

Lloyds Bank analysts note "It will be a temporary respite from the march up to and potentially beyond 4% in the coming months. The increase in the energy price cap will pull inflation higher in October, with a further significant rise likely next April as a result of soaring wholesale gas prices. That means that inflation seems set to remain around 4% into the second quarter of next year."

In the Eurozone, The number recorded higher than the previous months reading and this could put slightly more pressure on the ECB. The current party line is that the higher inflation rate is transitory and things should ease once energy prices move lower and the developing nation recover further from the pandemic. The highest contribution to the annual euro area inflation rate came from energy (+1.63 percentage points, pp), followed by services (+0.72 pp), non-energy industrial goods (+0.57 pp), and food, alcohol & tobacco (+0.44 pp) for the month of September.

U.K. CPI (YoY) (Sep) 3.1% vs exp 3.2% previous 3.2%

EU CPI (YoY) (Sep) 3.4% vs exp 3.4% previous 3.0%

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