Rising economic optimism boosted stock markets on both sides of the Atlantic on Friday, after euro zone inflation figures and US jobs data boosted hopes of a soft landing this year.

But economists have warned that while the recent big drop in energy prices has boosted the outlook for 2023, there is an implied inflation He will continue to pressure central banks to raise interest rates further to keep price increases in check.

“Inflation will not be able to return sustainably to target until this fundamental problem is overcome,” said Philip Rush, founder of consultancy Heteronomics.

headline Euro-zone December’s inflation figures, which fell back to single digits, helped European stocks post their best opening week of the year since 2009 as investors shed some of the year-end gloom.

Goldman Sachs noted that lower wholesale natural gas prices, which are down more than 75 percent from their peak in Europe, would “boost real incomes; help reduce inflation; and improve government budgets.” She added that the increase in exports will come from the end of China’s policy of not spreading the Corona virus.

In the United States, the S&P rose nearly 2 percent in the mid-afternoon after job growth slowed for the fifth consecutive month and hourly wages grew less than expected, providing some relief against inflationary pressures. A survey showed that activity in the broad US service sector contracted unexpectedly in December, the first drop since the coronavirus crisis in May 2020.

But US job growth was faster than expected, at 223,000 for December, while the unemployment rate fell to an all-time low, giving few indications of a downturn in US economic performance that would drive inflation down quickly.

In both the eurozone and the US, resilient economic data reinforced fears that central banks will have to continue their efforts to bring inflation down to last year’s low levels, despite clear indications that price increases have peaked. Central bankers fear that inflation will remain at around 4-5 per cent rather than fall to its 2 per cent target on both sides of the Atlantic.

European data “now… [point] to a very mild recession, about to not be a recession.” She added that this would encourage hawks in central banks to “worry about wages and [profit] Margins take over [from energy] as drivers of inflation.”

The decline in gas and petrol prices in the euro area helped inflation in the region fall to less than expected 9.2 percent from 10.1 percent.

The decline in energy prices also boosted an indicator of economic confidence in the European Union, to just 4 percent below its long-term average.

But as prices for services and non-energy industrial goods rose faster in December, the region’s core inflation rate — which excludes energy and food prices — rose to 5.2 percent, the highest rate since the single currency was created in 1999.

The European Central Bank is expected to raise interest rates by another percentage point to 3 percent at two meetings in February and March, with a peak around 3.5 percent before the summer. The US Federal Reserve is expected to raise interest rates above 5 percent and hold them there for a long time until inflationary pressures in the US subside.

In signs that the US economy is still hotter than the Fed would prefer, the jobs gain number of 223,000 for December beat economists’ expectations for an increase of 200,000.

The unemployment rate unexpectedly fell to a historic low of 3.5 percent, according to official data. “This is still a very tight job market,” said Veronica Clark, an economist at Citi. For an economist, the unemployment rate is low [is] Risks of rising future wages.