Inflation in the eurozone rose in November, with the European Union's harmonized index of consumer prices increasing to 2.3% from 2.0% in October, as reported by the EU statistics agency Eurostat. Energy prices fell by 1.9% year-over-year, while the services sector saw price increases of 3.9%, encompassing various services such as haircuts, medical treatment, hotels, restaurants, and sports and entertainment.
Since reaching a peak of 10.6% in October 2022, inflation has significantly decreased, prompting the European Central Bank (ECB) to adjust interest rates. The ECB initially raised rates to combat rising prices but began cutting them in June due to concerns about economic growth.
The recent contraction in the eurozone economy, highlighted by surveys of purchasing managers, has raised worries about growth prospects. Additionally, concerns have emerged regarding the potential impact of new U.S. trade policies under President-elect Donald Trump, including the imposition of tariffs on imported goods, on Europe's export-driven economy.
Forecasts indicate that the eurozone's economic output is expected to grow by 0.8% this year and 1.3% next year, according to the European Commission. As a result, market expectations for the upcoming ECB meeting on December 12 are centered around the extent of potential interest rate cuts rather than the decision to cut rates. Speculation includes the possibility of a larger-than-usual half-point cut in the benchmark rate, which currently stands at 3.25%.
In Germany, the largest economy in the eurozone, inflation remained steady at 2.4%. This stability is anticipated to influence resistance against a 50 basis point cut in interest rates, according to experts in the financial sector.
The ECB, based in Frankfurt, is responsible for setting interest rate policy for the eurozone countries that have adopted the euro currency.
