Eurozone inflation stays sticky, rising to 2.4%

Price rises in the eurozone increased to their highest level since July, according to early data from the European statistics agency Eurostat on Tuesday.

The overall sum largely reflects higher services costs, the agency concluded.

How the figures stack up

After a low of 1.7% in September, inflation in the 20 eurozone countries has risen again in the past three months, with the trend tending upward.

Inflation in December last year was 2.4% compared with 2.2% in November and 2% — the European Central Bank's (ECB) target — in October.

December saw a slight increase of 0.1% compared to the same month last year in energy prices. On the back of high prices in 2024, energy prices had been falling year-on-year in previous months.

Prices for services continued to rise sharply in December by 4%, with inflation in the sector remaining high in recent months dipping only slightly to 3.9% in September and November.

Inflation for food, alcohol and tobacco remained unchanged at 2.7%.

Eurostat said the highest price increases were in Croatia (4.5%), Belgium (4.4%) and Estonia (4.1%). The lowest inflation rates were recorded in Ireland (1.0%), Italy (1.4%) and Luxembourg (1.6%).

For Germany, Eurostat reported inflation at 2.8% — up on Germany's own assessment of inflation for December at 2.6%.

What it means for the economy

Inflation in the eurozone has been tamed from heights of more than 10% in late 2022 after Russia's invasion of Ukraine, partly through a rise in interest rates.

With weak economic growth, the European Central Bank (ECB) had turned its attention last year to cutting the cost of borrowing to combat signs of weakness in the European economy.

The ECB lowered its key interest rates again in mid-December to stimulate the weakening economy, despite inflation having shown an uptick in November.

It was the fourth interest rate cut by the euro central bankers this year and the third in a row. The central key interest rate, the deposit rate at which commercial banks invest money with the ECB, is now at 3%.

"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.

"The growth outlook is weak, but the fact that, for now at least, services inflation appears to be stuck around 4% means that ECB policymakers will tread carefully."

Edited by: Kieran Burke