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Eurozone: Inflation Is On The Rebound

Not defeated, the European inflation points the nose to the slightest recovery in energy prices. The year 2025 is a challenging one for the ECB.

By EC Invest

In the eurozone, inflation is rising again, reaching 2.3% in November (from 2.0% in October), according to Eurostat's rapid estimate. A slight rebound in energy prices was enough to revive inflationary pressures that never really disappeared on these fronts, especially the cost of services, which is still up 3.9% year-on-year.

This upward trend is different from the European Central Bank's business.

Concerned about the slowdown in our economies and the harmful impact of US tariffs on our external trade, the ECB intends to lower its key rates at its meeting on 12 December and several times after that. However, the increase in consumer prices remains high (excluding energy and unprocessed food, which is still 2.8%). It could well rebound again from January when European consumers' prices for energy will increase as several states reduce or stop their contributions to stabilise them.

ECI EUROZONE Rebound in Inflation GRAPHIC 920x320

In addition, the impact of ECB policy rate cuts will be limited if US rates do not follow the same trend. It is hardly imaginable that the interest rates that individual euro-zone countries pay to finance themselves could go much lower if, at the same time, investors are offered rates of more than 4% on the other side of the Atlantic. So, it will take much work for the ECB to navigate next year. More than political instability will be needed.

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