By Maria Martinez 
 

Eurozone inflation is on the rise. Headline inflation jumped to 4.9% year-on-year in November, reaching its highest level ever. Meanwhile energy inflation continues its relentless advance, rising to 27.5% from 23.7% in October. These upside surprises have caused many analysts to upgrade their inflation forecasts for 2022.

The European Central bank said it sees headline inflation averaging 3.2% next year, almost double its previous forecast at 1.7%. Two thirds of this upgrade is based on the assumption of higher energy inflation, according to ECB President Christine Lagarde.

Pantheon Macroeconomics forecasts eurozone headline inflation will be at 2.7% in 2022, 0.3 percentage points up from previous estimates. Pantheon sees inflation at 4.8% in December, before a fall to around 3.5% in the first quarter.

Taking into account recent inflation-data surprises and energy-market pricing, Barclays has also raised its eurozone inflation projection for 2022. Barclays forecasts the bloc's annual inflation rate will average 3.4% in 2022, 1 percentage point higher than its previous forecast.

In the near term, Goldman Sachs continues to expect upward pressure in goods prices amid high raw material costs due to supply chain disruptions and rising transport costs from elevated energy prices.

However, GS says eurozone headline inflation peaked in November and will decrease sharply in January 2022 to 3.7% year-on-year, as base effects wash out.

Looking beyond the near term, Goldman Sachs expects underlying inflation pressures to build gradually, pushing eurozone headline inflation to 1.7% year-on-year on a sustainable basis at the end of 2024.

Write to Maria Martinez at maria.martinez@wsj.com

(END) Dow Jones Newswires

December 21, 2021 06:15 ET (11:15 GMT)