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Eurozone inflation drops to 9.2 percent

Eurozone inflation drops to 9.2 percent

Government programs to limit gas price rises as well as falling energy costs and a stronger euro contributed to the lower headline inflation.
Inflation in the eurozone fell to below double digits at the end of last year, providing some, albeit limited, relief to those across the regions struggling with the cost of living.

According to preliminary Eurostat data released Friday, inflation eased to 9.2 percent in December, significantly lower than the 10.1 percent in November and analysts’ expectations before national inflation data pointed to a sharp decline.

Government programs to limit gas price rises as well as falling energy costs and a stronger euro contributed to the lower headline inflation. According to the data, the decline in headline inflation was driven by slower energy price inflation, which stood at 25.7 percent in December compared with 34.9 percent in November.

By contrast, core inflation, which filters out volatile components such as energy and food — and is thus considered a bellwether for future inflation trends — continued to rise to a new record of 5.2 percent in December from 5.0 percent in November.

Rising core inflation is set to affirm the European Central Bank’s plans to keep raising interest rates in bold 50 basis point steps in upcoming meetings to battle the worst inflation in the history of the euro.

Policymakers are increasingly concerned that recent high inflation risks de-anchoring inflation expectations and could lead to damaging price-wage spirals, especially as inflation is still racing well ahead of the eurozone average in some member countries.

The Baltics continue to suffer the most from red-hot inflation, with Latvia and Lithuania at around 20 percent. The lowest inflation rates were in Spain, at 5.6 percent.

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