Eurozone inflation rose to 2.4% year-on-year in December, according to preliminary data from Eurostat, up from 2.2% in November and aligning with economists’ expectations. This increase comes as markets continue to anticipate aggressive interest rate cuts by the European Central Bank (ECB) in 2025, with a 25-basis-point reduction expected this month.
On a monthly basis, consumer prices rose by 0.4%, reversing November’s 0.3% decline. Core inflation, which excludes volatile food and energy prices, remained steady at 2.7%, in line with forecasts. While this was expected, it highlights the ongoing challenge of driving underlying inflation closer to the ECB’s target of 2%.
Services continued to be the main driver of inflation, rising 4% year-on-year, up from 3.9% in November. Food, alcohol, and tobacco remained steady at 2.7%, while non-energy industrial goods eased slightly to 0.5%. Energy prices saw a significant rebound, rising 0.1% year-on-year after a 2% decline in November, due to higher fuel costs in some eurozone countries.
“This [inflation] figure does close to nothing in terms of altering the path for the ECB,” said Kyle Chapman, analyst at Ballinger Group. Chapman noted that Frankfurt had anticipated a temporary rise and would likely overlook this for now.
Inflation varied widely across eurozone member states. Croatia saw the highest annual harmonised inflation rate at 4.5%, followed by Belgium at 4.4%. Germany, Greece, and Spain recorded rates of 2.8%, 2.9%, and 2.8%, respectively. In contrast, Ireland, with the lowest annual inflation at 1%, saw a notable monthly spike of 0.9%. Italy recorded one of the lowest annual rates at 1.4%, with just a 0.1% monthly rise. France’s annual harmonised inflation rose slightly from 1.7% to 1.8%, while the Netherlands saw its highest rate since July 2023, at 3.9%.
