Economy: High inflation in the euro zone continues to weaken

High inflation in the eurozone eased off for the second month in a row in December.

Economy: High inflation in the euro zone continues to weaken

High inflation in the eurozone eased off for the second month in a row in December. Consumer prices increased by 9.2 percent compared to the same month last year, as reported by the Eurostat statistics office in Luxembourg on Wednesday. A previous estimate has been confirmed. In November, the inflation rate was 10.1 percent after hitting a record 10.6 percent in October.

Energy prices rose the most

In contrast, core inflation (excluding energy and food), which is less volatile, rose from 5.0 to 5.2 percent. This is the highest value since the introduction of the euro and shows that the sharp rise in prices is not only affecting energy and raw materials. Economists attach particular importance to core inflation because it indicates how costs are passed on from companies to consumers. This can result in second-round effects in the form of higher wage demands, which can ultimately result in a price-wage spiral that exacerbates inflation.

Energy prices continue to rise the most, albeit more slowly than in the previous months. On the other hand, the rise in prices has increased for food, services and industrially manufactured goods.

What is the ECB doing?

The price target of the European Central Bank (ECB) of two percent in the medium term is still clearly exceeded. Before the turn of the year, the central bank had somewhat slowed down its high pace of interest rate hikes. Recently there has been speculation that the pace of tightening could be slowed even further, although numerous central bankers have announced further significant hikes. At the same time, however, the maxim applies that the specific line should be decided on the basis of the respective data situation from session to session.

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