Danske Research Team
Danske Bank A/S
-
Inflation has continued to increase over the recent months, particularly due to higher electricity prices.
-
The underlying price pressure in the economy is elevated but not spinning out of control.
-
We expect core inflation will continue higher and keep headline inflation elevated. We expect 7.9% for 2022 on average and 4.9% in 2023.
Danish inflation increased from 10.0% in September to 10.1% in October. Energy and food prices are key drivers but inflation is also broad based. 10.1% is 1.6%-point higher for October than what we expected in early October and this can largely be explained by energy prices. The very large spot price declines we have seen on electricity would usually pull inflation down significantly. However, it looks like price increases on fixed price agreements have been so substantial that CPI increased instead. It is unclear what has exactly happened but it changes our view on the inflation outlook for 2023 substantially. District heating prices have also increased earlier than expected and we think there is more to come in the New Year.
The underlying price pressure in the economy remains elevated but the price pressure (CPI excluding energy and unprocessed food, taxes and subsidies) has not accelerated. M-o-m changes have actually moderated over the recent months.
Retailers are still seeing price increases ahead, even if the trend is declining somewhat. Thus, it looks like there remains a backlog of cost that has yet to feed through to consumers. The labour market remains strong and wage growth has picked up. That means, consumers still have more money to spend and that pushes prices higher.
We continue to pencil in an elevated underlying price pressure lifting core inflation further, which is also underpinned by the historically tight labour market. The pressure should begin to wear off by the end of 2023, on the back of a looser labour market by then. Higher energy prices is the key reason for lifting the inflation forecast, though.
We change our inflation forecast and now expect 7.9% inflation in 2022 (previously 7.5%) and 4.9% in 2023 (previously 3.4%).
This publication has been prepared by Danske Bank for information purposes only. It is not an offer or solicitation of any offer to purchase or sell any financial instrument. Whilst reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and no liability is accepted for any loss arising from reliance on it. Danske Bank, its affiliates or staff, may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives), of any issuer mentioned herein. Danske Bank's research analysts are not permitted to invest in securities under coverage in their research sector.
This publication is not intended for private customers in the UK or any person in the US. Danske Bank A/S is regulated by the FSA for the conduct of designated investment business in the UK and is a member of the London Stock Exchange.
Copyright () Danske Bank A/S. All rights reserved. This publication is protected by copyright and may not be reproduced in whole or in part without permission.
Recommended Content
Editors’ Picks
AUD/USD: Extra gains need to clear 0.6400
AUD/USD rose for the third day in a row, approaching the key 0.6400 resistance on the back of the acute pullback in the US Dollar amid mounting recession concerns and global trade war fear.
EUR/USD: Powell and the NFP will put the rally to the test
EUR/USD gathered extra steam and advanced to multi-month peaks near 1.1150, although the move fizzled out somewhat as the NA session drew to a close on Thursday.
Gold looks offered near $3,100
Prices of Gold remain on the defensive on Thursday, hovering around the $3,100 region per troy ounce and retreating from earlier all-time peaks near the $3,170 level, all against the backdrop of investors' assessment of "Liberation Day".
Interoperability protocol hyperlane reveals airdrop details
The team behind interoperability protocol Hyperlane shared their upcoming token airdrop plans happening at the end of the month. The airdrop will occur on April 22, and users can check their eligibility to receive $HYPER tokens via a portal provided by the Hyperlane Foundation by April 13, the team shared in a press release with CoinDesk.
Trump’s “Liberation Day” tariffs on the way
United States (US) President Donald Trump’s self-styled “Liberation Day” has finally arrived. After four straight failures to kick off Donald Trump’s “day one” tariffs that were supposed to be implemented when President Trump assumed office 72 days ago, Trump’s team is slated to finally unveil a sweeping, lopsided package of “reciprocal” tariffs.
The Best brokers to trade EUR/USD
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.