Inflation in the Eurozone increased in December as energy prices edged up slightly, official data revealed on Tuesday. Experts say this will likely prompt the European Central Bank (ECB) to proceed cautiously with its cycle of interest rate cuts.
Consumer prices rose by 2.4 percent last month, as forecast by analysts for Bloomberg and the financial data firm FactSet, compared to 2.2 percent in November.
Core inflation – which excludes volatile prices of energy, food, alcohol, and tobacco and is a key indicator for the ECB – remained stable at 2.7 percent.
The ECB is still expected to cut interest rates at its next monetary policy meeting on January 30th, but with price pressures persisting in the Eurozone, it will need to tread carefully despite signs of economic weakness, analysts say.
“We predict that the ECB will cut rates only once in the first half of this year, with additional cuts concentrated in the second half of 2025,” said Charlie Cornes, senior economist at the Centre for Economics and Business Research based in the United Kingdom (UK).
The December increase comes after inflation in the 20 countries of the single currency zone fell to a three-year low of 1.7 percent in September. Since then, consumer prices have gradually returned above the ECB’s two percent target, a figure reached in October.
The higher reading is a result of a 0.1 percent rise in energy prices in December, a significant rebound after a two percent decline in November.
Yesterday’s data show that food and alcohol prices remained stable at 2.7 percent last month, while inflation in the services sector rose to 4 percent in December, slightly up from 3.9 percent in November.
