Inflation in the countries that use the euro as their currency rose from 2.2 percent in November to 2.4 percent in December. This was confirmed by a final statement from the European statistics office Eurostat on Friday.
It is the third month in a row that overall inflation in the eurozone has increased. However, the increase is not something that makes economists scrap expectations of a future interest rate cut from the European Central Bank (ECB).
This applies, among others, to Jeppe Juul Borre, chief economist at Arbejdernes Landsbank. He expects a reduction on January 30 in connection with the next interest rate meeting.
- Overall, inflation has been much better controlled, and even though inflation is not quite on target and is currently rising slightly, there is still room to lower interest rates. If the slight upward trend continues, however, it could slow down the number of interest rate cuts this year, he writes in a comment.
A similar message comes from Erik Bjørstad, chief economist at Dansk Metal.
- In addition, the European economy is in a tailspin. Growth is very weak, and therefore there is a need to lower interest rates.
Inflation is one of the key figures that the central bank particularly looks at when it has to assess whether an interest rate cut is possible. If the interest rate is lowered too early, it could mean that inflation will increase. Conversely, if it happens too late, it could send the economy into reverse. This means it is a balancing act.
Overall, Jeppe Juul Borre and Arbejdernes Landsbank expect that the number of interest rate cuts in 2025 will be four or five.
- But this requires confidence that inflation, and especially core inflation, will behave. The ECB lowered interest rates four times through 2024, after raising interest rates in 2023 and 2022 to combat high inflation.
/ritzau/
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