During December, the rate of consumer price inflation increased in the euro area

Consumer price inflation in the euro zone rose over the past month, supporting the European Central Bank’s gradual approach to lowering interest rates.
The European Statistics Agency (Eurostat) stated that the consumer price index in the single European currency area rose last December by 2.4% annually, compared to 2.2% in November, which was in line with the average expectations of analysts surveyed by Bloomberg News.
Bloomberg indicated that the high inflation rate in the region, which includes 20 European Union countries, was driven by the rise in energy prices, which recorded their first rise since last July.

European Central warning

At the same time, the increase in prices did not come as a surprise to the European Central Bank, which warned several times that the path to returning the inflation rate to 2% would not be smooth.
The bank expects inflation to return to the 2% target level on a sustainable basis by the end of this year.

Bloomberg Economics analysts expect inflation to decline this month to 2.4% annually.

Yields on Treasury bonds declined

In the financial markets, bonds recorded a slight change against the backdrop of inflation data in the euro zone, as the yield on two-year German Treasury bonds, the most sensitive to monetary policy, fell by one basis point to 2.18%, which is slightly less than its highest levels two months ago, which it recorded yesterday.
Last month, the European Central Bank decided to reduce interest rates for the fourth time this year, by a quarter of a percentage point to 3%, reduce major refinancing operations by a quarter of a point to reach 3.15%, and reduce marginal lending by a quarter of a point to 3.4%.

Delaying interest rate cuts

Robert Holzmann, a member of the European Central Bank’s Governing Council, said the bank could consider waiting longer before cutting interest rates if inflation risks from energy prices or a stronger fall in the value of the euro emerge.
“It could take more time before interest rates are cut again,” Holzmann, who is also governor of the Austrian National Bank, added in a newspaper interview.