Haitong Jiang Chao: Who benefits from past experience and why the past experience is no longer valid
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Who Benefits After Lowering the Standard-And Why Does Past Experience No Longer Valid?
(Haitong Macro Weekly Communication and Thinking No. 300, Jiang Chao, etc.) Summary Suffered by the US manufacturing PMI change in December of 18, dragged down by Apple ‘s poor performance expectations last week (18.
6) U.S. stocks plummeted and dragged down the post-holiday Chinese stock market. However, the A-share market last Friday was still frustrated and a rare sharp rebound occurred. Finally, it achieved a good start in the first week of the new year.
Last Friday, there were two most important economic news. The first was that Premier Li inspected the three major banks of Bank of China, ICBC and CCB, and proposed to strengthen the counter-cyclical adjustment of macroeconomic policies and further take measures to reduce taxes and fees., We will make good use of the overall reduction and targeted reduction tools to support the financing of private enterprises and small and micro enterprises.
The second is to gradually announce the full reduction of 1 exchange rate for all financial institutions that night and release funds1.
5 trillion, and after hedging the MLF due in the first quarter, the net release of funds is about 800 billion.
Therefore, if you are looking for the reason for the stock market rebound last Friday, a comprehensive and comprehensive RRR cut may be the most important one.
Regarding the impact of the RRR cut, there are more explanations circulating in the market: “First, each time the RRR cut and interest rate cut, it must be denied that this is a substitute for water discharge, and the tone of the sound monetary policy has not changed;Second, each time the RRR cut, it is basically mentioned that in order to solve the financing difficulties of small and medium-sized enterprises, it is difficult to raise funds, but in the end it is almost unrelated to SMEs. Third, each time the RRR cut, the most exhilarating is the stock market, butThe stock market has never changed from a bear to a bull because of a RRR cut. Fourth, every time a RRR cut is said to have nothing to do with real estate, but the biggest beneficiaries are basically real estate.
“The subtext here is actually saying that the reduction of the standard is resuming the old way of releasing water. It cannot solve the problem of difficult financing and expensive financing. It is useless to the stock market, and real estate is the most beneficial.
But in our opinion, this statement is actually very misleading. Is the lowering of the water standard, useful to the economy, the stock market and the housing market?
There is no one-size-fits-all answer. In fact, we need to make accurate analysis based on the changes in China’s economic and financial environment, and this time the answer may not be that simple.
First, lowering the standard is to release water?
It’s not that simple!
Due to the accumulation of debts and real estate bubbles in the Chinese economy in the past 10 years, many people will attribute the cause to the currency oversupply, so as long as you see the gradual use of various instruments to launch currency, such as reverse repurchase, MLF, PSL, and the reduction of the reserve ratioAll things are interpreted as releasing water.
What is water release?
The key lies in the general increase in broad money.
To know if there is water release at the elementary level, we must first make clear what is called water release.
In the past ten years, many first-tier and second-tier cities have seen house prices more than doubled, with an average annual increase of more than 15%, and this increase is basically only China’s broad money growth rate.
From 2007 to 17, China’s general currency M2 quadrupled from 40 trillion to 170 trillion, with an average annual growth rate of 15%, far exceeding the nominal GDP growth rate of about 10% over the same period.
The general currency M2 actually underestimates the growth rate of China ‘s real currency. The reason is that the defined currency is various deposits. However, everyone knows that people now do n’t necessarily save money when they go to the bank, and even buy bank finance.It is not a deposit, so it is not included in the long-term statistics.
In 2007, the bank’s financial management was only 530 billion yuan. By 2017, it had reached 30 trillion yuan, a 60-fold increase.
Therefore, after adding the shadow banking represented by bank wealth management, the amount of real currency in China has reached 200 trillion yuan in 2017, which is five times that of 2007. This is the fundamental reason for the soaring housing prices in the past 10 years.
The preliminary determination of the base currency has never been issued in the past.
And most of what can be determined is actually the base currency, which accounts for only a small part of broad money.
For example, in November 18, China’s broad currency was as high as 181 billion yuan, while the base currency was only 30 during the same period.
5 trillion, accounting for only 1/6.
And from the past data to observe, from 2007 to 17, China ‘s base currency category increased from 10 trillion to 30 trillion, with an average annual growth rate of 10%, far less than 15% of the broad money M2.
Especially from 12 to 18, China’s base currency increased from 25 trillion to 30.
5 trillion, an average annual growth rate of less than 4%.
Therefore, past currency oversupply cannot be attributed to the central bank.
Commercial banks are out of control, and broad money is issued in excess.
In order to create broad money, in addition to expanding the provision of base money, commercial banks’ credit is actually a more important alternative. This is the core of creating broad money.
From 2007 to 17, the size of China’s bank credit surged from 26 trillion to 126 trillion, with an average annual growth rate of 17%, which is the fundamental reason for the oversupply of Chinese currency.
The key to whether water is lowered is the credit!
Therefore, the key to judging whether the RRR cut is to release water is whether commercial banks will significantly increase credit.
In this sense, the current round of RRR cuts began in April 18, and the statutory deposit reserve ratio of large banks has now replaced 13 with 17% when the current round of RRR cuts began.
5%, but the credit growth rate has increased rapidly, indicating that the recent long-term RRR cut has not formed a water discharge, let alone flooding!
Second, close the shadow bank, it is difficult to follow the old path!
Basel Accord, using capital to bind banks.
The financial crisis in history has been related to the increase of commercial bank loans. Whether it is the bubble economy in Japan or the subprime crisis in the United States, the reason is that commercial banks are highly leveraged institutions, usually only about 10% of capital, and other moneyYes, if the commercial bank borrows too much money and the loan is issued in the wrong place, it will easily lead to financial risks.
Therefore, everyone was in pain. They invented the Basel Accord to regulate the behavior of commercial banks in issuing loans. The core content is how much capital a commercial bank has, and at most it can only issue new loans.
At present, the capital adequacy ratio of commercial banks is about 12% for a long period of time, and the theoretically achievable loan growth rate is about 12% at most.
But in the past 10 years, the average annual growth rate of the assets of developing country banks has been as high as 17%, far exceeding their capital adequacy ratio.
In 2009, China had not strictly implemented the Basel Accord, so when the 4 trillion policy was introduced, the bank’s loan growth rate once exceeded 30%. This can be explained by the innocence of the unknown.
After 2012, China began to formally implement the Basel III. In theory, the bank’s asset expansion rate should be strictly adhered to, but we have observed a steady decline in credit growth after 12 years, but the bank’s total asset growth rateIt has remained at a high level of around 15%, which is actually due to the great development of shadow banking.
Shadow banks evaded regulation, resulting in currency oversupply.
According to the Basel Accord, each credit allocation of a bank occupies its capital, so even if the bank wants to lend to a real estate company, if its capital is used up, then it cannot lend.
However, there is a loophole in this. If the bank loan target is a financial institution, since the risk of internal reorganization of the financial institution is very low, the bank loan to the financial institution will not take up capital.
So everyone finds that banks can first lend money to other financial institutions, and then lend money to real estate companies through other financial institutions. In this way, capital supervision is bypassed. This is the principle of the well-known channel business, and it is also a Chinese shadow.The core content of the bank.
From 14 to 16 years, the total size of trust companies, securities asset management companies and fund subsidiaries surged from 28 trillion to 55 trillion. In fact, most of them have invested in the role of channels for commercial banks to issue loans, and together they have created hugeThe shadow bank has caused an oversupply of money.
The substance is more important than the form, and the channel business is suppressed.
The core content of such financial supervision, which has been implemented since 18 years, is to break bankruptcy payments and penetrating supervision, which is actually equivalent to completely shutting down Chinese-style shadow banks.
First of all, an important reason for the great development of shadow banking in the past was to help banks avoid capital supervision. In layman’s terms, shadow banking can help banks transform their assets from real estate loans to interbank loans or off-balance-sheet loans.
In 17 and 18, the “Notice on Regulating Bank Credit Services” and the “Measures for the Management of Commercial Banks’ Large Risk Exposure” were previously issued, requiring banks to follow the principle of substance over form and incorporate the breakthrough principle into regulatory requirements.
In other words, commercial banks need to penetrate layers of transactions, treat the ultimate debtor of their interbank or off-balance-sheet assets as a counterparty, and count the corresponding risks, which is equivalent to tearing up the shadow bank’s camouflage and occupying the risk capital truthfully.
And shadow banking itself has corresponding costs. Since the benefits of shadow banking are gone, naturally everyone will not do it.
As a result, the scale of major financial channels such as trust companies, securities asset management companies, and fund subsidiaries has fallen sharply, and the three major non-standard financings of social financing have continued to shrink.
Break rigid payments and curb invalid demand.
In fact, in the past, the great development of shadow banking, in addition to evading supervision, is another important reason for rigid payment.
The two most important assets in China’s shadow banking are real estate financing and the hidden debt of local governments.
Real estate financing is actually tied to land finance, so in the final analysis, it is the implicit guarantee of government credit.
In 2017, the National Financial Work Conference proposed that “there are local party committees and governments that need to establish a correct outlook on performance, strictly control the increase in local government debt, long-term accountability, and reverse accountability”, in the “Hidden Debt of Local Governments” in 2018The “Accountability Measures” was issued, and the “life-long accountability” mechanism was further strengthened.
Under the mechanism of supplementing the long-term accountability of hidden debt, the financing of local government financing platforms has shrunk severely, and the net issuance of urban investment debt has dropped from 1 trillion yuan in the past year to about 500 billion yuan.It has shrunk by more than 300 billion yuan, which was a significant increase in the past.
In the past, the great development of shadow banking was inseparable from the implicit blessing of government credit. If there is no risk of default and the rate of return is high, who doesn’t want to do it?
However, in the future, if the local government’s implicit debt management is managed, then only market-based financing needs will be left. In 18 years, the default of Chinese corporate bonds exceeded 100 and the default amount exceeded 100 billion. If you have to bear the risk of defaultWhere can there be so many financing needs?
Close the shadow bank, it is difficult to walk the old road.
Therefore, as long as we adhere to the supervision of shadow banking, even in the future, even commercial banks must regain credit, which must be carried out in the bank’s balance sheet. To consume the corresponding risk capital and bear the corresponding risks, this means that their credit accumulation must be prudent.It is unlikely that currency oversupply will reappear.
In fact, many banks have no requirements for reserve ratios. Some UK, Canada, Sweden, New Zealand, and even required reserve ratios are very low, some Eurozone, Japan and the United States; and many economies implementThe interest rate is zero or even negative, but their money and credit growth rates are not high. One important reason is that after the financial crisis, countries have strengthened financial supervision.
Therefore, as long as we do not relax the supervision of shadow banking, we are not re-entering the old path.
Third, increase the supply of funds and push the interest rate downward. Let us analyze the possible impact of the RRR cut.
The blocking gate opens the main gate, reducing capital requirements.
First of all, due to our strict supervision of local hidden debts and the fixed positioning of housing and housing, the future credit demand will even improve and it will be difficult to cause a surge.
For government financing, we are actually blocking the door and opening the main door.
The aim is that we may raise the fiscal deficit rate from 2 in 19 years.
6% to 3%, while expanding the issuance of special bonds by local governments, and the total may be more than one trillion yuan more than in 18 years.
However, except for the shadow banking supervision, the non-standard financing of the urban investment platform is still shrinking. In addition, the super-trillion-dollar local government replacement bonds have basically expired in 18 years.The short-term contraction in 19 years will also exceed trillions.
Taken together, the government’s total financing may stabilize, but it will not increase significantly.
In terms of real estate financing, the severe surge in the past few years has mainly come from borrowing from residential sectors, especially in third- and fourth-tier cities.
However, in the future, the trend of monetization resettlement of shed reform to physical resettlement is very obvious. Without shed reform monetization to provide residents with funds, coupled with the decline in investment and the rise in the actual debt interest rate, it is difficult to expect the residential loan growth to pick up significantly.
Therefore, there is no possibility of a surge in the two major financing needs of infrastructure and real estate.
The increase in capital supply has pushed down interest rates.
In the gradual reduction, the RRR cut will greatly increase the financial supply of financial markets and help push down interest rates.
We know that the full name of the reserve ratio is the deposit reserve ratio, which means that the deposits of commercial banks must be paid to the central bank, and the standard of payment is the statutory reserve ratio.
But in fact, the money that commercial banks put in the past is always a statutory reserve, and then a part of it is reserved. This part is called excess reserve.
At the beginning of the year, the RRR was lowered, and the portion of the statutory reserve that has been lowered has become an excess reserve, commonly known as the excess reserve ratio. This indicator is the most important indicator of financial market capital supply.
After multiple reductions in 18 years, the excess reserve ratio rose to 1 in 2Q18.
7%, also maintained at 1 in the third quarter.
5%, which are significantly higher than the same period in 2017.
After the overall RRR cut this time, the over-reserve ratio is expected to exceed 2%, which means that the funds are extremely abundant.
From the perspective of historical data, after 2008, we have had four cycles of RRR cuts, and each of the RRR cuts has been accompanied by a continuous decline in national debt interest rates, which indicates that the RRR cut will increase the supply of funds and promote the decline of the decline.
Fourth, support the bull market in the bond market, improve the stock market earnings, currency interest rates fell sharply, support the bond bull market.
An important change since 19 years has been a sharp decline in money market interest rates.
In the first week of 19, the average value of currency rates R007 and DR007 was 2.
4%, while the average of R001 and DR001 is 1.
About 9%, which is almost back to its lowest value since 2016.
The decline in money market interest rates has formed a strong support for the bond bull market, which is reflected in two aspects.
Preliminary, the current DR007 has replaced 2.
36%, below 2.
55% of the 7-day reverse repo bidding pricing, the former is equivalent to the market’s 7-day repo pricing, or the equivalent of transition pricing, and the former goes beyond the supplementary explanation that the market is beginning to generate interest rate cuts in the open market.
During this period, the currency interest rate has an important impact on the debt city government’s debt yield. The interest rate of each term of the government bond can be regarded as the expected average increase of the currency interest rate at different times in the future. Therefore, the depreciation of the currency will push the government bond interest rate to continue to decline.
Observing from historical data, the interest rate of China’s 10-year government bonds over the past few years is on average 30bp higher than R007, and currently it is 2%.
R007, which is around 4%, still has an interest rate spread of 70bp with the national debt rate, which means that China’s 10-year government bond yields will continue to increase in the future, and it will gradually increase to below 3%.
The risk-free interest rate has fallen, increasing stock market returns.
The decline in national debt interest rates has an important impact on the pricing of financial assets.
Following the DCF model, there are three main factors affecting stock pricing: one is its future earnings, the other is the risk-free interest rate, and the third is the risk premium.
The lower the interest rate of the national debt, the lower the risk-free interest rate, and the reasonable estimate of the stock market can be converted.
The increase in risk-free returns in the past year has decreased, and the valuation of A shares should be increased. However, the current stock market valuation has instead fallen to a historical low point. It is due to the market’s pessimistic expectations, which actually gave birth to a hugepotential.
Fifth, the currency growth rate is difficult to rise, and real estate may not benefit. Finally, let ‘s talk about our views on real estate. In fact, everyone knows our views. Since 17 years, we have always been cautious about the real estate market, even if it is downgraded across the board.Yes, our views have not changed.
High currency growth in the past has driven house prices soaring.
Why be cautious about the real estate market, the logic is actually very simple, because it is the level of currency growth that determines the increase in house prices, and the era of high currency growth is over.
In the past, everyone was optimistic about China’s real estate market and told many stories. At first, everyone talked about the demographic dividend, but China ‘s demographic dividend ended as early as 2011, and this year ‘s transformation has turned into whether China ‘s total population has begun to decline, so the demographic dividend has an impact on the real estate market.Support is long gone.
The problem is that after 2011, house prices are still rising. Later, everyone said that house prices have little relationship with demand, but it was determined by supply. The government monopolized land supply, so house 西安耍耍网 prices only rose and did not fall.
Some people take the rise in house prices in countries around the world as a case, saying that house prices in most countries have been hitting record highs, so house prices will always rise, and housing prices in Japan are just a special case.
Schiller said that the story of the US real estate bubble was actually similar.
And in Animal Spirit, Robert.
After the decline in US housing prices, everyone has been silent about this story.
In our opinion, there is only one logic that can continue to explain the growth of China’s house prices, which is the excessive increase in currency. The average growth rate of China’s broad money from 2007 to 17 has fallen by 15%, so it can explain the continuous rise in house prices.
But looking forward to the future, we believe that the era of high currency growth is over. After controlling 苏州夜网论坛 the shadow bank and just breaking through, the future China ‘s currency growth hub will replace 15% instead of 7-8%, which means that the potential growth rate of house prices will beObviously down, and considering the depreciation of the house, the income of residents who have soared in the past, the house prices may not continue to rise in the future.
In the future, currency interest rates are low, and house prices may not rise.
In the future, the gradual decline of currency growth will lead China to enter the era of low interest rates. Correspondingly, it will enter the era of low interest rates. Therefore, the biggest advantage of currency exchange rate is the devaluation of the currency, but it may not actually promote the rise of house prices.
If you look back over the past 10 years, the average mortgage interest rate in China has been as high as 6%, and the rental return rate in major cities generally does not exceed 2%. This shows that you don’t care about the interest rate, even if the loan interest rate for buying a house is very high, you bought a house.In the future, the return on rent will be very low, but as long as the house price can increase by more than 10% every year, everything is not a problem.
But on the other hand, in the future, if interest rates are lowered, even if China ‘s mortgage interest rate drops to 4%, but because the currency growth rate has fallen and house prices have not risen, do you want to buy a house?
In fact, Japan next door is a typical case. When its house prices skyrocketed in the 1980s, its official interest rate averaged as high as 5%. Later, Japan ‘s interest rates fell all the way to even negative interest rates, but house prices fell for more than 20 years because of no other reason. Japanese currencyThe growth rate was as high as two in the 1980s, but it is currently around zero.
Therefore, what we want to say is that China is currently at a historic inflection point, and many laws of the past may not actually apply in the future.
In the past, when everyone saw the currency relax, the thought was to release water and housing prices rose.
However, just after we managed the shadow bank and the breakthrough was just realized, the loosening of monetary policy will not lead to flooding, it will only cause interest rates to fall, support the rise of the bond market, and increase stock market returns, which is of little significance to the real estate market.
I. Economy: Industrial production is temporarily stable 1) Real estate rebounded at a low level.
The growth rate of real estate sales area of the 30 largest real estate developers increased from 16% to 35% in December, and the growth rate of real estate sales in major 34 cities increased from -1.
9% rose to 4.
5%, but the growth rate of real estate sales in 18 third- and fourth-tier cities has replaced -17% from -14%. Real estate sales in third-tier and lower-tier cities account for more than 70% of the country’s total, which means that national real estate sales are still weak.
2) Car sales remain weak.
In the first three weeks of December, the passenger car wholesale of passenger unions increased retail sales by -30% and -35% over the past ten years, all of which expanded from the decline in November and reached a new low, meaning that passenger car sales were still weak in December.
3) Industrial production is temporarily stable.
Decrease in coal consumption for power generation at six major power plants narrowed from 13% to 1.
7%, the national crude steel output growth rate in December remained at 8.
9% high, the growth rate of heavy truck sales rose to 21% in December, which means that industrial production in December is still stable in the short term.
Second, prices: the risk of deflation has not disappeared 1) Food continues to grow.
Food continued to grow last week, among which vegetables, aquatic products, poultry prices rose, pig prices, egg prices fell slightly, and food prices rose 0 month-on-month.
2) CPI continues to decline.
In December, the prices of edible agricultural products of the Ministry of Commerce and the wholesale increase of agricultural products of the Ministry of Agriculture were 0.
2%, CPI food prices are expected to rise 0% in December.
8%, CPI in December was slightly lower than 2%.
3) PPI continues to decline.
In December, international oil prices plummeted, domestic steel prices, and coal prices continued to fall. In December, the price of raw materials for port futures fell by 2 from the previous month.
1%, PPI is expected to decrease by 1 in December from the previous month.
2%, the PPI exceeded the increase in December and dropped to zero.
4) The risk of deflation remains.
Commodity prices have shown signs of stabilizing rebound since 19 years, but due to the excessive decline in commodity prices in the fourth quarter of 2018, we predict that the one-month PPI in 1919 will replace the negative range and eliminate the risk of deflation.
Third, liquidity: overall long-term reduction 1) interest rate growth has fallen.
Currency interest rates fell sharply last week, with the average R007 falling by 170P to 2.
49%, mean R001 is down 6p to 1.
DR007 downstream is 44bp to 2.
37%, DR001 down 6bp to 1.
2) Withdraw from the open market.
Last week, the reverse repurchase expired withdrawn 580 billion yuan, the long-term reverse repurchase operation was 110 billion yuan, the state treasury’s fixed deposit expired withdrawn 100 billion yuan, and the open market net withdrawn 570 billion yuan.
3) The exchange rate appreciates slightly.
Last week, the US dollar index depreciated slightly, the RMB rebounded slightly against the US dollar, and the average onshore and offshore RMB exchange rates rose to 6.
4) Comprehensive and full-scale reduction.
Last week, we announced a full-scale reduction of one merger. At the same time, MLF, which was terminated in one quarter, is no longer a sequel, and the net release of long-term funds is about 800 billion yuan.
In January, it will face the test of reverse repurchase and MLF expiration, cash withdrawal demand before the Spring Festival, tax payment standards and local bond issuance in advance. The reduction of standards means that liquidity will continue to be abundant, which can hedge against recent fund disturbances and helpReplaced by wide money to wide credit.
4. Policy: Accelerate infrastructure investment 1) Financial service entities.
Premier Li Keqiang of the State Council went to the Bank of China, ICBC and CCB during the inspection and stated that financial services to the real economy must make efforts to resolve the difficulty in financing, and strive to reduce the cost of loans for small and micro enterprises.
It is necessary to grasp the balance of financial services to the real economy and prevent and mitigate risks, promote the healthy development of the capital market, and resolutely hold to the bottom line that no systemic regional risks occur.
2) Infrastructure investment accelerated.
Over the past month, the NDRC has approved urban rail and rail construction plans (including new ones) in federal cities and regions, including five urban rail transits in Chongqing, Jinan, Hangzhou, Shanghai, and Changchun, Guangxi Beibu Gulf Economic Zone, and new Xi’an to Yan’anThe construction of three regional railways along the Yangtze River City Group in Jiangsu Province has a total investment of about 860 billion yuan.
3) Promote the upgrading of bonded areas.
State Council Premier Li Keqiang presided over an executive meeting of the State Council on January 2 to deploy benchmarking international advanced levels to promote the upgrading of the comprehensive bonded zone and create a new platform for high-level opening; it decided to introduce facilitation reform measures to solve the problem of profound “difficulty of replacement”.
V. Overseas: US non-agricultural supervised expectations in December, Powell listened to the market 1) US non-agricultural supervised expectations in December.
Last Friday, the United States released employment data. In December, the United States added 31 non-agricultural jobs.
20,000 people, far exceeding market expectations, the US unemployment rate in December 18 from 3 the previous month.
7% rose to 3.
9%, the labor force participation rate rose to 63.
At 1%, the average hourly wage of non-agricultural private enterprises rose to 0 from the previous month and several times.
4% and 3.
2) Powell has listened to the market and will adjust the contraction if necessary.
Powell took office at the annual meeting of the American Economic Association last Friday. He mentioned that he is optimistic about the US economy and that monetary policy is not a decision. The Fed will remain patient in implementing flexible policies, remain sensitive to market signals, and carefully listen to the market’s budget for risks.He does not think that the contraction is a preliminary of recent market fluctuations, but if different reports are triggered, he will not hesitate to adjust the contraction plan.
3) Apple Corp. cut its profit forecast for the first quarter.
After Wednesday ‘s closing, Apple ‘s CEO Cook issued a number of investor letters and expected Apple ‘s revenue to be $ 84 billion in the first quarter of fiscal 2019, exceeding expectations of $ 89-93 billion, and lowering its gross profit margin to 38%., Is the lower limit of the air force guidance interval.
The news triggered a market crisis and Apple’s sustainable plunge of nearly 10% last Thursday.
4) Eurozone inflation is slightly lower than expected.
On Friday, Eurostat released data on the growth rate of the euro area, which eased the CPI period in December1.
6%, slightly lower than expected 1.
7%, and after excluding energy and food prices, the core value of the euro zone’s harmonized CPI reached an initial value of 1% around December, which was in line with expectations and previous values.