Euro area – Inflation remains stubborn

Inflation is rising due to energy and food

According to preliminary data from Eurostat, the inflation rate rose to 2.4% in December (from 2.2% in November). This is in line with the consensus. Inflation rose sharply in energy prices (from -2.0% in October to 0.1%). The core inflation rate excluding energy, food and beverages remained at 2.7%, which also was in line with economists' expectations.

Inflation in the euro area has risen largely due to volatile energy and food prices. Energy prices pushed up inflation in December, after having significantly lowered it in autumn. This is also due to the fact that energy prices fell in December 2023 and the year-on-year rate for energy is therefore rising (base effect).

The core rate remains stubbornly high

Over the entire year of 2024, the year-on-year rate of inflation excluding the volatile energy and food prices (core inflation) remained above the ECB target at just under 3%. In recent months, however, the short-term 3-month rate had fallen, fuelling hopes that the core rate could fall sustainably. In December, however, the three-month rate is apparently up again. This means that hopes of a swift decline in the year-on-year core inflation rate are fading. This is particularly true given that insurance premiums could rise significantly in January. The rise in oil and natural gas prices at the turn of the year is also likely to be reflected in core inflation with a time lag.

For full text see attached PDF-Version.