Inflation in the eurozone rose to 2.4% in December, driven by higher energy prices, according to Eurostat figures . Although this increase raises questions about monetary policy, the European Central Bank (ECB) remains focused on gradual interest rate cuts in 2025.
Rising prices, especially for energy and services
Inflation rose to 2.4% in December from 2.2% in November, mainly due to a rebound in energy prices, which rose for the first time since July. Core inflation, which excludes energy and food prices, was 2.7%. In the services sector, including restaurants, hotels and public transport, prices rose 4%.
Within the Eurozone, Croatia has the highest inflation at 4.5%, while Ireland has the lowest at 1%. Germany, the largest economy in the Eurozone, had inflation of 2.8%, while France was at 1.8%.
ECB stays true to course
The rise in inflation is no surprise to the ECB, which had previously warned that the road to the 2% inflation target would be bumpy. ECB President Christine Lagarde expressed hope that 2025 will be the year the central bank achieves its targets. Although core inflation remains a concern due to continued wage increases in the services sector, the ECB expects this trend to flatten due to a weakening labor market.
The ECB is sticking to its strategy of gradual interest rate cuts, with the rate currently at 3%. The next rate cuts are expected to come in increments of 0.25%, although some policymakers are pushing for larger reductions.
Risks on the Horizon
Energy prices remain an unpredictable factor. The cold winter and reduced Russian gas supplies via Ukraine have caused Europe to use up its gas reserves faster than in the last seven years. At the same time, there are international risks, including possible trade tariffs from the new US President Donald Trump. These measures could damage the European economy, with uncertain consequences for inflation.
