In preliminary data to be released on Jan. 7, eurozone consumer prices are forecast to be 2.0% higher than in December 2024, according to FactSet consensus estimates. That is slightly down from November’s inflation reading of 2.1%.
Core inflation, which excludes volatile components such as energy and food costs, is expected to have risen by 2.4% year over year in December, in line with November’s figure.
The European Central Bank is widely expected to leave the key interest rate unchanged at its coming meeting on Feb. 5.
“These data points reinforce the message that inflation is under control in Europe,” says Michael Field, chief European markets strategist at Morningstar. “The fact that core inflation, which had been more stubborn, is now also edging closer to the 2% target is good news for policy makers and could mean further interest rate cuts sooner rather than later,” he adds.
“Inflation in the euro area is likely to have eased to 2.0% in December. This mainly reflects month-on-month declines as well as negative base effects in energy consumer prices,” says Ulrich Kater, chief economist at Deka Bank. “We expect core inflation to remain unchanged at 2.4%. While the strong euro continues to dampen industrial goods price dynamics, seasonal price increases in tourism and transport may have been stronger than usual due to the timing of the Christmas holidays.”
In its CPI preview, Market News International says it expects the Harmonized Index of Consumer Prices (HICP) to rise, “largely due to base effects for energy prices, though sequential food and energy inflation is also set to be positive.”
“There are expectations that service inflation could moderate slightly in December vs November”, but that would still leave services HICP in the region of 3.8%-3.9% year on year, from 3.9% in November, according to MNI. “Core goods prices meanwhile face their own potential idiosyncratic risks including the sequential impact of “Black Friday” sales in November, though the broader theme is that they have bottomed out (0.6%Y/Y in Nov) after a long post-pandemic disinflationary stretch.”
Inflation Expected to Remain Low in the Eurozone
Eurozone inflation is expected to remain low overall in 2026 amid a strong euro and US tariffs. Headline inflation is expected at 1.8% in 2026, down from 2.1% in 2025, according to estimates compiled by Bloomberg.
ECB staff revised their economic forecasts in their latest prediction in December. They now see overall inflation averaging:
2.1% in 2025 (the same as in its September forecast)1.9% in 2026 (up from 1.7%)1.8% in 2027 (down from 1.9%)2.0% in 2028 (a new forecast)
For core inflation, they expect an average of 2.4% in 2025, 2.2% in 2026, 1.9% in 2027, and 2.0% in 2028. “Inflation has been revised up for 2026, mainly because staff now expect services inflation to decline more slowly,” the ECB said at the time.
Energy Prices Volatile on Venezuela
Recent developments in Venezuela have reintroduced uncertainty into energy markets. Prices fell in weekend trading following reports that Venezuelan President Nicolás Maduro had been captured by US forces. Venezuela holds the world’s largest proven oil reserves.
Crude oil markets later recovered their losses, with prices trading nearly flat compared with Friday’s close on Monday morning.
“This morning there’s still a lot of uncertainty, and for markets, there’s a debate about the extent to which any short-term oil supply disruption from the upheaval will end up being outweighed by a longer-term supply boost from higher Venezuelan production,” says Jim Reid of Deutsche Bank Research.
No ECB Rate Cut Expected in February
Markets do not anticipate the ECB to change rates at its first meeting of the year on Feb. 5. Swap markets are pricing in stable rates for most of 2026, with a marginal uptick in implied rates for the last meeting of the year on Dec. 17, suggesting that some probability of a rate hike is priced in.
The ECB began easing interest rates in June 2024, and has since delivered eight rate cuts, lowering the deposit rate from 4.00% to 2.00%. Since June 11, the three key policy rates are:
Deposit Facility Rate: 2.00%Main Refinancing Operations Rate: 2.15%Marginal Lending Facility: 2.40%When Are the ECB Meetings in 2026?Feb. 5, 2026.March 19, 2026.April 30, 2026.June 11, 2026.July 23, 2026.Sept. 10, 2026.Oct. 29, 2026.Dec. 17, 2026.
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