Credit: STATEC
On Wednesday 6 November 2024, Luxembourg's statistics institute, STATEC, published its updated inflation forecast report for the Grand Duchy.
In August 2024, STATEC had maintained its inflation forecast of 2.3% for this year but lowered its 2025 estimate to 2.6%. At the time, it was believed that the next wage indexation would be triggered in the fourth quarter of 2024.
Based on its updated estimates, STATEC has now said a new wage indexation would not be due until the first quarter of 2025.
STATEC noted that the inflation rate in Luxembourg fell to 0.95% in October 2024 - its lowest level since the beginning of 2021. This development is attributed to the drop in fuel prices (petroleum product prices dropped 13.9% over one year in October), together with a gradual slowdown in core inflation (+1.8% in October).
The low inflation rates observed since August (averaging -12.0% over one year in the past three months) have thus reduced expected inflation to 2.1% for 2024 and to 2.5% for 2025. Consequently, the next wage indexation would be delayed until the first quarter of 2025.
At the eurozone level, inflation is expected to increase to 2.0% in October according to an initial estimate (compared with 1.7% a year earlier). Services inflation is stagnating (+3.9% in October and September 2024) while food inflation on the rise again (+2.9% in October compared with +2.4% in September).
STATEC added that inflation is expected to approach 2% in the eurozone - and 2.5% in Luxembourg - in 2025. Electricity prices will play a role here in the Grand Duchy. That being said, STATEC described market price expectations as volatile and said 2025 forecasts should be treated with caution.
