Eurozone Inflation Rebounds After 7 Months... Will Interest Rate Cut Timing Be Delayed?

The European Union (EU) statistical agency Eurostat announced on the 5th (local time) that consumer prices in the Eurozone (20 countries using the euro) rose by 2.9% year-on-year in December last year (flash estimate). This is 0.5 percentage points higher compared to the 2.4% consumer price increase in November.

Some market participants interpret this as a rebound in inflation, suggesting that the European Central Bank (ECB) may delay the timing of interest rate cuts.

The downward trend that had continued since May last year stopped after seven months. The core inflation rate, which shows the underlying trend of prices, slightly narrowed its increase from 3.6% in November to 3.4% in December. Germany, the largest economy in the Eurozone, saw its consumer price inflation rate jump sharply by 1.5 percentage points from 2.3% in November to 3.8% in December.

Bloomberg explained, "The path to reaching the ECB’s target of 2% inflation has become more challenging," adding, "Eurozone governments are gradually phasing out energy subsidies."

Earlier, some experts predicted that the ECB might start cutting interest rates as early as March this year, citing the steep decline in inflation in the second half of last year. However, given the recent rebound in inflation, there is now a view that the likelihood of the ECB cutting rates immediately is low.

Additionally, there are concerns about ongoing "uncertainties," as the Houthi rebels in Yemen have recently attacked commercial vessels passing through the Red Sea, a major international trade route, causing delays in the transportation of consumer goods to Europe and other regions, which could potentially push prices up again.

Carsten Brzeski, Chief Economist at ING Bank, explained, "This strengthens the ECB’s stance of maintaining stability and not rushing any decisions on interest rate cuts."

This content was produced with the assistance of AI translation services.