In December, inflation in the Eurozone decreased as energy prices rose at a slower pace. According to the European Union’s statistical office, prices across the 19 countries that used the euro in 2022 grew at an annual rate of 9.2% in December, down from 10.1% in November. This marks a decrease from the record high of 10.6% seen in October.
The decline in headline inflation is positive news for households and businesses that have been struggling with high costs. However, prices in many sectors of the economy are still increasing at a significant rate, highlighting the challenges that policymakers face.
While energy inflation decreased to 25.7% in December, compared to 34.9% in November, the cost of food, alcohol, and tobacco rose 13.8%, a slight increase from 13.6% the previous month. Services inflation also increased to 4.4% from 4.2%.
Core inflation, which excludes volatile food and energy prices, reached 5.2% in December, a slight increase from 5% in November.
“Therefore, there can be no talk of a sustained weakening of inflation,” said Ralph Solveen, a senior economist at Germany’s Commerzbank, in a research note.
The data is likely to encourage the European Central Bank to continue with its policy of increasing borrowing costs. The central bank, which raised interest rates aggressively last year, has indicated that it will continue to do so in 2023.
“We have more ground to cover,” said ECB President Christine Lagarde last month, noting that inflation “remains far too high and is projected to stay above the target for too long.” The European Central Bank aims to keep inflation close to 2%.
