FX.co ★ Eurozone Inflation Accelerates To 2.3%

Inflation within the Eurozone saw its second consecutive rise in November, while core inflation figures remained stable, setting the stage for a cautious interest rate reduction by the European Central Bank (ECB) next month.

According to preliminary data released by Eurostat, the harmonized index of consumer prices (HICP) showed a year-on-year increase of 2.3 percent, following a 2.0 percent rise in October. This figure met the expectations of economists.

Meanwhile, core inflation—excluding volatile items such as food, energy, alcohol, and tobacco—held steady at 2.7 percent, slightly below the anticipated 2.8 percent by economists.

Bert Colijn, an economist at ING, commented, "With demand likely to remain weak, the ECB may not need to be overly concerned about the current inflation surge. Although headline inflation might remain high in December, a moderation is expected in early next year."

The recent inflation increase aligns with expectations, suggesting that the ECB will view its monetary policy as effective and proceed with another rate cut in December, according to Commerzbank economist Vincent Stamer. Commerzbank anticipates a reduction of 25 basis points in interest rates next month.

In terms of specific components, services inflation eased to 3.9 percent from the previous 4.0 percent. Energy prices decreased for the fourth consecutive month, dropping 1.9 percent following a 4.6 percent decline the previous month.

The prices of food, alcohol, and tobacco went up by 2.8 percent compared to a 2.9 percent rise in October. Non-energy industrial goods prices increased by 0.7 percent, following a previous gain of 0.5 percent.

Month-on-month, the HICP declined by 0.3 percent in November, reversing a similar increase from October.

Preliminary estimates from Germany's statistical office, Destatis, released on Thursday, indicated that consumer price inflation in the Eurozone's largest economy further escalated to 2.2 percent in November, marking its highest level in four months.