Blog

Eurozone inflation rises to 2.9% in December

BRUSSELS: The annual rate of inflation in the eurozone rose to 2.9 per cent in December mainly due to energy costs, official data showed Friday.

Consumer prices edged up from the 2.4 per cent annual rate in November 2023, in line with expectations by analysts for Bloomberg.

It is the first rise in the annual rate of inflation since an unexpected increase in April last year.

The data supports comments by European Central Bank (ECB) chief Christine Lagarde, who has warned that Europe should remain on guard despite falling inflation.

The ECB has undertaken a series of interest rate hikes to tame red-hot inflation after consumer prices reached a peak of 10.6 per cent in October 2022.

But as eurozone inflation edged closer to the ECB’s two-per cent target, there have been growing calls to cut rates, which the bank’s officials have pushed hard against.

“December’s jump in headline inflation in the eurozone was widely anticipated and entirely due to a base-effects driven increase in energy inflation, so it won’t alter ECB policymakers’ views on the outlook for monetary policy,” said Jack Allen-Reynolds, deputy chief eurozone economist at Capital Economics.

The rise had been expected because of governments had provided exceptional support in December 2022 to households to confront heating bills that had surged due to Russia’s invasion of Ukraine.

NO VICTORY YET

Energy prices in the eurozone fell in December, by 6.7 per cent on an annual measure, but that was less than the 11.5 per cent drop in November, data published by the EU’s official statistics agency showed.

Food and drink price increases slowed down to 6.1 percent last month compared with 6.9 percent in November, according to Eurostat.

Core inflation, which strips out volatile energy, food, alcohol and tobacco prices, however slowed to 3.4 percent in December from 3.6 percent in November, Eurostat said.

Core inflation is the key signal for the ECB.

The ECB’s Lagarde has insisted that it is too early to declare victory over inflation and has previously dismissed any talk about interest rate cuts as “premature”.

The next rate decision meeting will be on Jan 25.

Allen-Reynolds of Capital Economics said he still suspected the ECB would start cutting rates “in or around April”.

Among the 20 countries that use the euro, Belgium and Italy had the lowest inflation rate, reaching 0.5 per cent in December, Eurostat said.

Inflation also rose in the European Union’s two biggest economies.

In Germany, inflation increased to 3.8 per cent in December from 2.3 per cent the previous month. And in France, consumer prices ticked up to 4.1 per cent in December from 3.9 per cent in November, Eurostat said.

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button