Eurozone inflation rose 2.9% year-on-year in December, below expectations of 3%, ending seven consecutive months of decline. The monthly inflation rate rose by 0.2%. Core inflation, excluding energy and food, reached 3.4%. PPI fell by 0.3% in November, representing a significant annual decline of 8.8%.
advertisementThe euro zone's annual inflation rate rose again in December after seven consecutive months of decline, albeit at a slower pace than expected.
The eurozone's harmonized consumer price index (HICP) rose 2.9% year-on-year in December, according to the latest preliminary figures released by Eurostat on Friday. This figure is higher than November's 2.4%, but slightly lower than the expected 3%.
On a month-on-month basis, inflation rose 0.2%, marking an increase from November's levels and advancing from a 0.6% decline in the previous month.
Food, alcohol and tobacco prices rose the most in December, rising 6.1% year-on-year, but slightly lower than November's annual rate of 6.9%. Service costs were stable at 4.0% year over year. Non-energy commodity prices fell from 2.9% to 2.5%, and energy prices fell by 6.7%, narrowing the decline from the 11.5% drop in the previous month.
The core inflation rate, which excludes volatile factors such as energy and food, was 3.4% year-on-year, down slightly from November's 3.6%, but in line with market expectations.
Eurostat also released Producer Price Index (PPI) inflation statistics for November 2023, showing that it was -0.3% month-on-month, down from October's 0.3% rise and lower than the expected 0.1% decline. It was revealed. In particular, PPI fell by 8.8% compared to December 2022 levels, slightly below the expected contraction of 8.7%.
Italy's annual inflation rate hit 0.6% in December, slightly below expectations of 0.7%, according to the latest provisional data released by Istat on Friday.
Germany reported on Thursday. inflation The year-on-year rate rose to 3.7% in December, up from 3.2% in November and in line with expectations. France's inflation rate also rose to 3.7% in December, slightly up from 3.5% in November, but still below the expected 3.6% rise.
Market reaction and ECB's latest statements
Money markets have adjusted their expectations after the latest inflation data, expecting the European Central Bank (ECB) to cut interest rates less sharply in 2024, with expectations now down by 147 basis points. .
Government bond yields also rose slightly, evidenced by German Bundestag yields rising to 2.17% and Italy's 10-year BTP yield rising to 3.86%.
Meanwhile, European stock markets faced headwinds on Friday, with the Euro Stoxx50 index down 0.7%. Spain's IBEX 35 was particularly slow, falling 0.9%.
At the December Governing Council meeting, ECB President Christine Lagarde highlighted the possibility of upward pressure on inflation in the short term and stressed that the ECB was not yet considering cutting interest rates. This opinion was echoed by several ECB officials (Nagel, Müller, Vasl, Vujicic, and Decos), who warned against premature discussions about rate cuts.
The ECB's latest forecasts suggest a gradual normalization of inflation, with headline inflation expected to average 2.7% in 2024 and eventually reach 1.9% by 2026. There is.
