FRANKFURT (Reuters) – Year-on-year inflation in the euro zone started to rise again in December and could accelerate further in the first part of 2024, easing the pressure exerted by financial markets on the European Central Bank (ECB) to it begins to reduce its interest rates.
The consumer price index calculated according to European standards (HICP) increased by 2.9% year-on-year last month in the 20 countries sharing the European currency, after +2.4% in November.
Economists polled by Reuters expected a sharper acceleration in inflation, to 3.0%.
The data appears to confirm the ECB’s forecast that inflation bottomed in November and is now expected to stagnate in a range between 2.5% and 3% this year, before slowing again in 2025.
This reaccelerating trend, already observed in the data published Thursday for France and Germany, is not, however, found in the underlying inflation figures.
Excluding the most volatile items such as unprocessed food products and energy, inflation slowed to 3.9% from 4.2% the previous month.
A narrower measure of price rises, which excludes food, energy, alcohol and tobacco, also fell, falling to 3.4% from 3.6% in November.
ECB officials could, however, be concerned about the 0.7% increase over one month in the prices of services, whose annual inflation rate has remained stable at 4%.
This component of inflation is closely linked to wages and could signal an increase in wage pressures likely to fuel a general increase in prices.
This rebound in inflation comes as investors and ECB officials display divergent positions on the trajectory of prices and its implication for monetary policy.
Market participants expect the ECB to cut six rates this year, with a first cut in borrowing costs in March or April, but central bankers say price pressures remain high and inflation remains high. is not yet under control.
The ECB will make its next monetary policy decision on January 25 for which it has already signaled that it is not expected to announce any changes.
After the publication of the inflation figures, the yield on the ten-year German Bund, the benchmark for the euro zone, increased its progression and the euro somewhat reduced its losses against the dollar.
(Written by Balazs Koranyi, French version Blandine Hénault, edited by Kate Entringer)
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