Preliminary data published by Eurostat showed that the eurozone annual inflation accelerated in December (for the first time since April), mostly on technical factors, such as the end of some government subsidies and low energy prices getting knocked out of base figures. However, core inflation continued to decline and reached its lowest level since March 2022. Overall, the latest data easing financial markets pressure on the ECB to start cutting interest rates.
According to the report, the consumer price index rose by 2.9% per year after rising by 2.4% per year in November. Economists had expected inflation to rise to 3.0% per annum. Meanwhile, on a monthly basis, the consumer price index increased by 0.2% compared with a 0.6% drop in November.
Eurostat reported that the core consumer price index - energy, food, alcohol & tobacco - rose by 3.4% per year, as expected, after an increase of 3.6% per year in November.
The data showed that the annual growth of the overall consumer price index was due to an increase in the cost of food, alcohol & tobacco (+6.1% compared with +6.9% in November), services (+4.0% vs. +4.0%) and non-energy industrial goods (+2.5% vs. +2.9%). Meanwhile, energy prices fell by 6.7% per annum after declining by 11.5% per annum in November.
According to ECB forecasts released in December, inflation will still be at 2.6% in the last quarter of this year, then hitting 2.0% in the third quarter of 2025 and eventually settling at 1.9%, which is below the ECB's target level (2%).