Euro area core inflation continues to prove sticky

Euro area headline inflation came in at 2.3% Y/Y in November as expected by the consensus, after 2.0% in October . Services inflation eased only to 3.9% after 4.0% and continue d to show signs of stickiness with underlying inflation s table at 2.7% for the third month in a row . Goods price inflation edged a little higher to 0.7% after 0.5%. Energy prices bounced back somewhat in annual basis due to base effects, to -1.9% from -4.6%. Belgium recorded the highest inflation rate (5.0%) while Ireland released the lowest one (0.5%). Germany: Headline HICP inflation remained stable in November at 2.4% Y/Y, below consensus expectations (2.6%). German national core inflation slightly picked up to 3.0% from 2.9% due to goods prices (+0.7% from +0.4%) while services prices remain ed stable at 4.0%. France: H eadline H ICP inflation came out at 1.7% Y/Y in November , slightly below consensus but in line with our expectations , after 1.6% in October. Looking into the details, food inflation surprisingly decreased to 0.2% from 0.6% but services inflation increased to 2.5% from 2.3%. Italy: headline HICP inflation surged to 1.6% from 1.0%, above consensus expectations (1.4%). Istat stated the increase mainly reflected the rise in the prices of r egulated energy products (from +3.9% to +7.5%) and n on-regulated energy products (from -10.2% to -6.6%). National core inflation slightly increased to 1.9% from 1.8%. Spain: Inflation (HICP) increased sharply to 2.4% in November, up from 1.8% in October . This figure aligns with consensus expectations and reflects the rise in electricity and fuel prices compared to their levels in November 2023. Underlying inflation remained nearly stable at around 2.5% . ECB cal l: Despite a somewhat hawkish inflation report due to the stickiness of service s inflation that gives some food to ECB hawks, we stick to our view of a 25 bps rate cut in December . Today’s report cemented our view that the ECB will continue to proceed carefully , keeping its gradual meeting-by-meeting approach. We continue to expect a rate cut at each meeting until June 2025, with a terminal rate at 2%.