Inflation in the euro area, December 2022

Harmonized inflation fell to 9.2% in December from 10.1% in November. Thus, it is somewhat closer to the target rate of the European Central Bank of 2.0%.

The December result was driven by slower growth in energy and services prices. At the same time, prices for foodstuffs, alcohol and tobacco, non-energy manufactured goods and services grew at a faster pace. Meanwhile, annual core inflation, which excludes volatility in energy and non-processed food prices, rose to 6.9% in December from 6.5% in November, the highest since records began.

On a monthly basis, harmonized consumer prices fell 0.4% in December after falling 0.1% in November.

Commenting on the release, Bert Colein, Senior Economist at ING, said:

“Given the rapid decline in energy prices and the improvement in energy supply forecasts, 2% could be reached much earlier than expected. However, an increase in core inflation will be enough for the ECB to continue its 50 bps increase in February and March.”

Our group forecasts inflation to average 5.9% in 2023, up 0.3 percentage points from last month’s estimate, before falling to 2.5% in 2024.