Preliminary data published by Eurostat showed that the eurozone annual inflation accelerated in December, confirming market expectations, as well as reaching the highest level since July. Meanwhile, core inflation remained unchanged again.
According to the report, the consumer price index rose by 2.4% per year, as expected, after increasing by 2.2% per year in November. Meanwhile, on a monthly basis, the consumer price index rose 0.4%, offsetting the November drop (-0.3%). Economists had expected a 0.2% increase. The latest reading was the highest since April.
Eurostat reported that the core consumer price index - excluding energy, food, alcohol & tobacco - rose by 2.7% per year, as in November. Consensus estimates also suggested an increase of 2.7%.
The data showed that the annual growth of the overall consumer price index was due to an increase in the cost of services (+4.0% vs. +3.9% in November), food, alcohol & tobacco (+2.7% vs. +2.7%) and non-energy industrial goods (+0.5% vs. +0.6%). Meanwhile, energy prices rose by 0.1% after declining by 2.0% in November. The full extent of increases in the reading - along with persistence in services and core inflation - will be closely watched by the ECB, which markets currently expect to cut interest rates from 3% to 2% across several trims this year.
A separate report submitted by the ECB showed that eurozone households increased their inflation expectations in November. The median respondent in the ECB's survey expected prices to grow by 3.4% per annum in November, from 3.2% in October - marking the second increase in a row. The expectation for three years ahead was raised to 2.4% - the highest level since July - from 2.1%.