Euro Area Inflation December 2022

Harmonized inflation declined to 9.2% in December from November’s 10.1% reading. It therefore moved somewhat closer to the European Central Bank’s target rate of 2.0%.

December’s result was due to slower increases in the prices for energy and services. Meanwhile, prices for food, alcohol and tobacco, non-energy industrial goods and services rose at a faster pace. Meanwhile, the annual rate of core inflation, which excludes volatile energy and unprocessed foods prices, rose to 6.9% in December from November’s 6.5%—marking the highest print since records began.

On a monthly basis, harmonized consumer prices fell 0.4% in December, following November’s 0.1% dip.

Commenting on the release, Bert Colijn, senior economist at ING, noted:

“With energy inflation dropping quickly and energy supply forecasts improving, 2% could be reached much sooner than expected. Still, rising core inflation will be enough for the ECB to continue to hike by 50bp in February and March.”

Our panel sees inflation averaging 5.9% in 2023, which is up 0.3 percentage points from last month’s estimate, before declining to 2.5% in 2024.