From Morningstar:

Inflation in the Eurozone rose to 2.9% in December, raising concerns about rate cuts by the European Central Bank (ECB). This was the first rise in inflation across the region since April, pushing European stock markets to decreased by nearly 0.9%.

Michael Field, Morningstar’s European market strategist, explained that the uptick in inflation to 2.9% was due to a rise in utility prices, leading to a technical spike in overall inflation. However, core inflation, which excludes energy and food, fell 20 basis points to 3.4% in December, showing a positive underlying trend.

Contributors to Eurozone inflation in December were food, alcohol, tobacco, services, non-energy industrial goods, and a 6.7% decrease in energy, according to Eurostat. Investors are now concerned that the spike in inflation may influence the ECB’s decision to cut interest rates. All eyes are on next month’s inflation release.

Looking ahead, Commerzbank expects the underlying upward pressure on prices to ease over the course of the year. Due to cheaper energy dampening price rises for non-energy goods and services, the bank estimates the core inflation rate to fall to 2.5% by the middle of 2024.



Read more: Eurozone Inflation Data Puts ECB Rate Cuts in Doubt