DWS: Inflation up again in December

DWS: Inflation up again in December

7 januari 2025

Inflatie Rente Monetair beleid ECB
Inflatie (Shutterstock)

Despite strong upward pressure on prices in Germany in December, eurozone inflation rose only to 2.4 per cent from 2.2 per cent in November. Prices were again driven up by services prices, which rose by 4.0 percent, leaving the core rate unchanged at 2.7 percent. For the first time since July 2024, energy prices also rose again, by 0.1 percent year-on-year. Consumers also had to spend 2.7 per cent more on food than in the previous year.

Today's figures are in line with the ECB's forecast for the fourth quarter of 2024. However, the German figures also show that the underlying inflation risks should not be downplayed. This has already been reflected in somewhat more skeptical market expectations regarding the further path of rate cuts.

However, the ECB is not dependent on single data points. The weak economy is increasingly becoming a headache for some central bankers. Moreover, leading indicators show that companies are finding it increasingly difficult to push through price increases due to weak demand. We therefore expect inflation to hover around the central bank's target of 2 per cent in 2025. We continue to expect a further 25 basis point cut in the deposit rate in January.

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