Inflation in the 20 countries that use the euro currency rose in November but that likely won't stop the European Central Bank from cutting interest rates as the prospect of new US tariffs from the incoming Trump administration adds to the gloom over weak growth.
The European Union's harmonised index of consumer prices stood up 2.3 per cent in the year to November, up from 2.0 per cent in October, the EU statistics agency Eurostat reported Friday.
Energy prices fell 1.9 per cent from a year ago, but that was offset by price increases of 3.9 per cent in the services sector, a broad category including haircuts, medical treatment, hotels and restaurants, and sports and entertainment.
Inflation has come down a long way from the peak of 10.6 per cent in October 2022 as the ECB quickly raised rates to cool off price rises. It then started cutting them in June as worries about growth came into sharper focus.
High central bank benchmark rates combat inflation by influencing borrowing costs throughout the economy. Higher rates make buying things on credit whether a car, a house or a new factory more expensive and thus reduce demand for goods and take pressure off prices. However, higher rates can also dampen growth.
Growth worries got new emphasis after surveys of purchasing managers compiled by S&P Global showed the eurozone economy was contracting in October.
On top of that come concerns about how US trade policy under incoming President Donald Trump, including possible new tariffs, or import taxes on imported goods, might affect Europe's export-dependent economy. Trump takes office January 20.
More From This Section
Need to simplify goods and services tax, reduce cess: Ex-CEA Subramanian
Fiscal deficit at 46.5% of full-year target at Oct-end, shows govt data
India's GDP slows to 5.4% in September quarter, lowest in 7 quarters
Govt mulls change in base year to 2022-23 from 2011-12 for GDP computation
I-T dept probes 500 Dubai property cases, Rs 700 cr evasion found in Delhi
The eurozone's economic output is expected to grow 0.8 per cent for all of this year and 1.3 per cent next year, according to the European Commission's most recent forecast.
All that has meant the discussion about the December 12 ECB meeting has focused not on whether the Frankfurt-based bank's rate council will cut rates, but by how much. Market discussion has included the possibility of a larger than usual half-point cut in the benchmark rate, currently 3.25 per cent.
Inflation in Germany, the eurozone's largest economy, held steady at 2.4 per cent. That will strengthen opposition against a 50 basis point cut, said Carsten Brzeski, global chief of macro at ING bank, using financial jargon for a half-percentage-point cut.
The ECB sets interest rate policy for the European Union member countries that have joined the euro currency.
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
Also Read
Markets Today: GDP; Sensex, Bankex new expiry day; Enviro Infra IPO listing
S&P Global cuts India's FY26 GDP growth forecast to 6.7% from 6.9%
Premium
Statsguru: Can pricier loans tame food prices in India? Debate heats up
Govt expects food inflation to slow in coming months on bumper crop harvest
Trump's promises on growth, inflation might derail due to $36 trn debt