Inflation in the euro area accelerated more than economists expected in December.
Consumer prices price increases, i.e. inflation, accelerated in the euro area in December.
According to Eurostat's preliminary data from the European Union's Statistical Centre, inflation was 2.9 percent in December. In November, prices rose by 2.4 percent from a year ago.
In a survey by the news agency Reuters, economists estimated in advance that the inflation rate would have been 3.0 percent in December. Before December, inflation slowed down in the euro area for 13 consecutive months.
Energy became cheaper in December by 6.7 percent from the same time last year. Unprocessed foodstuffs became more expensive by 6.7 percent, industrial products by 2.5 percent and services by 4.0 percent.
Core inflation, closely monitored by central banks, was 3.4 percent in December, while it was 3.6 percent in November.
Core inflation is an important measure because the direct impact of sensitively changing energy and food on consumer prices has been removed from it. Therefore, it gives a better indication of the broad scope of inflation.
European according to the central bank's (EKP) price stability objective, inflation in the euro area should be two percent in the medium term. The acceleration of inflation in December means that monetary policy easing can hardly be expected in the coming months.
The central bank already warned of a temporary acceleration of inflation in mid-December, when it kept its policy rate unchanged. In other words, monetary policy remained very tight. The key interest rate, i.e. the deposit rate of commercial banks, has never before been as high, i.e. 4.00 percent, as it is today.
According to the ECB, price pressures within the euro area are still high mainly due to the strong increase in unit labor costs. The unit labor cost is calculated by dividing the labor cost by the amount of production.
Plenty In the course of the year, despite everything, inflation has slowed down considerably. It was at its peak in October 2022, when prices rose by 10.6 percent from a year ago.
The main reasons for the slowdown in more than a year are the tightening of monetary policy and the easing of the energy crisis and international supply disruptions.
According to the economic forecast published by the Central Bank in December, inflation will slow down to 2.7% this year, 2.1% next year and 1.9% in 2026.
Half past one within the year, the ECB has tightened monetary policy exceptionally strongly. It raised key interest rates ten times in a row until mid-September.
Interest rate hikes start to slow down the rate of inflation usually after six months and reach their full effect typically over a year.
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