Volkswacht Bodensee - Eurozone inflation picks up in December

Consumer prices picked up to 2.4 percent last month, as predicted by analysts for Bloomberg and financial data firm FactSet, and up from 2.2 percent in November.

Meanwhile, core inflation -- which strips out volatile energy, food, alcohol and tobacco prices and is a key indicator for the ECB -- was stable at 2.7 percent.

The ECB is expected to cut interest rates at the next monetary policy meeting on January 30, but it will need to tread carefully with price pressures still present in the eurozone.

December's rise comes after inflation in the 20-nation single currency area fell to a three-year low of 1.7 percent in September. Consumer prices have since been inching back up to above the ECB's target of two percent, the exact figure hit in October.

The higher reading is due to energy prices rising by 0.1 percent in December, a significant uptick after a fall of two percent in November. Meanwhile, food prices remained stable at 2.7 percent last month.

Services inflation rose by four percent last month, up slightly from 3.9 percent in November, which experts said would likely force the ECB to cut rates at a slower pace.

"The continued stickiness of eurozone services inflation means that the ECB is likely to keep cutting interest rates only slowly even as the economic outlook remains poor," said Jack Allen-Reynolds, deputy chief eurozone economist at Capital Economics.

- 'Hopefully on target' -

Inflation in the eurozone has been brought firmly back down from the highs of more than 10 percent reached in late 2022 following Russia's invasion of Ukraine.

With weak economic growth, the ECB had turned its attention last year to cutting rates to combat the signs of weakness in the European economy.

In December, the ECB reduced its key deposit rate by a quarter point to three percent, its third cut in a row and fourth since June, when it kicked off its current easing cycle.

ECB chief Christine Lagarde insisted in a New Year's message that the bank would focus on further reining in inflation this year.

"We have made significant progress in 2024 in bringing down inflation and hopefully 2025 is the year when we are on target as expected and as planned in our strategy," Lagarde said on January 1 in a video on social media platform X.

"Of course, we will continue our efforts to ensure that inflation stabilises sustainably at that two percent medium-term target," she added.

Inflation rose in the eurozone's two biggest economies, Germany and France, to reach 2.8 percent and 1.8 percent respectively in December.

Eurostat data also showed Ireland had the lowest rate of inflation in December at one percent.

Other official data published on Tuesday showed unemployment in the eurozone stood at 6.3 percent in November.

P.Staeheli--VB