EUROPEAN INFLATION: EZ Final HICP Broadly In-Line With Flash; Sticky Services
Eurozone December Final HICP was unrevised from the flash reading on a rounded basis at 2.4% Y/Y (from 2.2% in Nov) and 0.4% M/M (-0.3% in Nov). Unrounded Y/Y was revised down 0.01% to 2.43% Y/Y (2.44% flash, 2.24% prior). On a M/M basis it was unrevised from flash at 0.36% ( -0.32% prior) non-seasonally adjusted.
- Core inflation (ex energy, food, alcohol & tobacco) was unrevised versus flash at 2.71% Y/Y (2.72% in Nov), remaining around the 2.7% Y/Y level for the fourth consecutive month. On a monthly basis it was also unrevised at 0.45% (-0.57% in Nov).
- The final reading emphasises the stickiness of services seen in the flash print, with services' contribution to headline HICP rising 0.04ppts to 1.78ppts - the highest contribution since August. The Y/Y figure rose to 3.97% Y/Y (vs 3.92% in Nov), reaffirming the flash estimate.
- Energy was unrevised from flash at 0.1% Y/Y (vs -2.0% in Nov), moving into positive territory on a Y/Y basis for the first time since July. The contribution to headline HICP was 0.01ppts (vs -0.19ppts prior).
- "Non-energy industrial goods'" (i.e. core goods') contribution fell to 0.13ppts (from 0.17ppts in Nov). Y/Y print again was unrevised from flash at 0.51% ( 0.65% prior), with M/M at -0.10% (vs -0.11% flash, 0.00% prior).
- "Unprocessed foods'" contribution fell to 0.07ppts (from 0.10ppts), and "Processed foods, alcohol and tobacco" contribution was broadly unchanged at 0.44pts (vs 0.43ppts prior).
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ECB: Lane: ECB Can Afford To Look Through Small Deviations From Target
Q: Once price stability has been restored, can Central Banks afford to look-through deviations from the target in either direction?
A: Lane: “Our 2% target is not a continuous target, it’s a medium-term target. That means we can look through short-term fluctuations”.
- The monetary policy reaction will depend on the size, persistence and origin of the deviation from target.
- “There is some value in having a stable interest rate policy all else equal”.
- If there is a deviation, we then need to assess second round effects and decide whether to respond or ignore. Lane stresses again that the 2% target is symmetric.
- In a previous response, Lane notes that he thinks the Eurozone is “quite far away” from a recession, based on current data.
EURIBOR: EURIBOR FIX - 18/12/24
EURIBOR FIX - EMMI/Bloomberg.
- EUR001W 2.9450 -0.0950
- EUR001M 2.7620 -0.0130
- EUR003M 2.8520 -0.0130
- EUR006M 2.6520 -0.0120
- EUR012M 2.4740 0.0000
US: Elon Musk Appears To Call On Republicans To Vote Down Govt Funding Stopgap
Elon Musk has appeared to urge Republican lawmakers to vote down a three-month funding stopgap to avert a government shutdown on December 21, stating on X, "This bill should not pass" adding "Ever seen a bigger piece of pork?", referring to legislation seen to include extraneous measures.
- House Speaker Mike Johnson (R-LA) announced the stopgap yesterday after weeks of negotiations that have irked Republican conservatives and moderates alike. The final text includes USD$100 billion in disaster relief and USD$10 billion for farmers, neither of which is offset.
- The 1,500-page bill also includes language to curb some outbound investment in the Chinese tech sector and a Democrat-sponsored provision to extend duty-free imports for Haitian textiles. A measure to direct more spending back to pharmaceutical companies was dropped - another blow to the industry after President-elect Trump said on Monday he will "knock out the middleman" to bring down drug prices.
- Musk is widely seen as one of Trump's most influential inner circle members. However, several previous public pronouncements have fallen flat, notably when he supported Howard Lutnick for Treasury Secretary, decrying Trump's ultimate selection - Scott Bessent - as "a business-as-usual choice."
- Although the bill is likely to pass the House with strong Democrat support, the level of Republican dissent sets up a period of potential instability in the House when Johnson must navigate his Jan 3 re-election vote, revisit FY25 govt funding, and start work on Trump's big-ticket agenda - all of which needing near-unanimous support from conservative deficit hawks.
- Punchbowl News reports: "Several senior House Republican leadership sources told us that more than 100 GOP lawmakers are likely to vote against the bill."
