Update inflation Quant-model

The Quant-model indicates slightly higher inflation in the euro area

Our machine learning-based quant model (see documentation here ) expects slightly higher inflation rates in the coming months than it did last month. Calculations with data available until mid-November show this. Between December of this year and April of next year, the model now forecasts a 0.1 percentage point higher inflation. One reason for the higher year-on-year rates is that the model reacts to the recent sharp rise in food and beverage prices. As far as the inflation trend is concerned, the model expects the December inflation rate to rise to 2.5%, mainly due to a base effect, after which inflation is forecast to fall below 2%.

The core rate could tumble down next year

The Quant-model's forecasts for inflation excluding the volatile prices of energy, food, and beverages (core rate) have not changed. As in the previous month, the model expects a temporary increase in core inflation to 2.9% in December, followed by a noticeable decline in the first half of next year. This forecast takes into account that strong price increases in the spring of 2024 will no longer be included in the year-on-year comparison and that the core rate will therefore fall in the spring of 2025 (base effect). However, we assume that the model could underestimate the core rate.

For full text see attached PDF-Version.