Eurozone Inflation Eases to ECB Target

Eurozone consumer price inflation eased to 1.9% in December 2025, down from 2.1% in November and slightly under the preliminary estimate of 2.0%. It marked the first time since May that inflation has come in below the European Central Bank’s 2% target, reinforcing expectations that interest rates will remain on hold for an extended period. Services inflation moderated to 3.4% from 3.5%, while price growth for non-energy industrial goods softened to 0.4% from 0.5%. Energy prices fell more sharply, declining 1.9% year-on-year compared with a 0.5% drop in November. By contrast, inflation in food, alcohol, and tobacco edged higher to 2.5% from 2.4%. Core inflation, excluding energy, food, alcohol, and tobacco, slipped to 2.3%, its lowest level in four months. Among the euro area’s largest economies, harmonized inflation cooled in Germany (2.0% vs. 2.6%), France (0.7% vs. 0.8%), and Spain (3.0% vs. 3.2%). Italy was the exception, with HICP inflation ticking up modestly to 1.2% from 1.1%.

Euro area consumer price inflation eased to 2.0% in December 2025, down from 2.1% in November, according to a preliminary estimate. This marks the lowest rate since August, returning to the ECB’s midpoint target and reinforcing expectations that interest rates are likely to remain steady for the foreseeable future. The slowdown reflected a modest easing in price growth for services (3.4% vs. 3.5% in November) and non-energy industrial goods (0.4% vs. 0.5%), alongside a sharper decline in energy costs (-1.9% vs. -0.5%). In contrast, prices for food, alcohol, and tobacco accelerated slightly to 2.6% from 2.4%. Core inflation, which excludes energy, food, alcohol, and tobacco, fell to 2.3%, the lowest in four months and just below expectations of 2.4%. Among Europe’s largest economies, HICP rates eased in Germany (2.0% vs. 2.6%), France (0.7% vs. 0.8%), and Spain (3.0% vs. 3.2%), while Italy bucked the trend with harmonized inflation rising slightly to 1.2% from 1.1%.

The annual inflation rate in the Eurozone was revised down to 2.1% in November 2025 from a preliminary of 2.2%, matching the October reading. Prices slowed for food, alcohol and tobacco (2.4% vs 2.5%) and non-energy industrial goods (0.5% vs 0.6%) but accelerated for services (3.5% vs 3.4%) and fell less for energy (-0.5% vs -0.9%). The lowest annual rates were registered in Cyprus (0.1%), France (0.8%) and Italy (1.1%) while the highest rates were recorded in Estonia (4.7%) and Croatia (4.3%). Inflation in Germany was 2.6% and in Spain it topped 3.2%. Meanwhile, the CPI fell 0.3% from the previous month, the first decline since January and in line with forecasts. Annual core inflation rate steadied at 2.4% for a second month.