The annual rate of inflation in the euro zone rose to 2.9% in December mainly due to energy costs, official data showed on Friday.
Consumer prices rose by an annual rate of 2.4% in November 2023, in line with analysts’ expectations for Bloomberg.
It is the first rise in the annual rate of inflation since a surprise increase in April last year.
The data backs up comments from European Central Bank (ECB) chief Christine Lagarde, who has warned that Europe should remain vigilant despite falling inflation.
The ECB has undertaken a series of rate hikes to tame red-hot inflation after consumer prices peaked at 10.6% in October 2022.
But as eurozone inflation edged closer to the ECB’s 2% target, there were growing calls for a rate cut, which the bank’s officials pushed hard.
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“December’s jump in Eurozone headline inflation was widely expected and entirely due to the core effect of a pick-up in energy inflation, so it will not change ECB policymakers’ views on the outlook for monetary policy,” Jack said. Allen-Reynolds. Deputy Chief Eurozone Economist at Capital Economics.
The rise was expected because governments had provided extraordinary support in December 2022 to households to deal with heating bills that had risen due to Russia’s invasion of Ukraine.
No win yet
Energy prices in the eurozone fell in December by 6.7 percent year-on-year, but that was less than the 11.5 percent fall in November, according to data released by the EU’s official statistics office.
Food and drink price increases slowed to 6.1% last month compared to 6.9% in November, Eurostat said.
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Core inflation, which strips out volatile energy, food, alcohol and tobacco prices, however slowed to 3.4% in December from 3.6% in November, Eurostat said.
Core inflation is the key message for the ECB.
The ECB’s Lagarde insisted it was too early to declare victory over inflation and had previously dismissed any talk of rate cuts as “premature”.
The next meeting to decide interest rates will be on January 25.
Capital Economics’ Allen-Reynolds 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% in December, according to Eurostat.
Inflation also rose in the European Union’s two largest economies.
In Germany, inflation rose to 3.8% in December from 2.3% the previous month. And in France, consumer prices rose to 4.1% in December from 3.9% in November, according to Eurostat.
Source: AFP