London Daily

Focus on the big picture.
Tuesday, Dec 02, 2025

Is the cost of living crunch starting to ease?

Is the cost of living crunch starting to ease?

Eurozone figures are expected to show inflation slowed down in December, bringing hopes of relief to consumers and governments.

Inflation in the eurozone is expected to have fallen sharply at the end of 2022, giving some reprieve to people struggling to pay bills — and to leaders feeling their wrath.

Record-high rates are expected to have returned to single digits in December, with national data from Germany, France and Spain in recent days showing price increases easing more quickly than forecast. In Italy, inflation also came off its peaks.

Hotly anticipated figures for the eurozone as a whole are released on Friday.

Government programs to limit gas prices as well as falling energy costs and a stronger euro contributed to signs that Europe may be able to start putting the worst of the cost-of-living crisis behind it. That will come as a relief to leaders battling pan-European waves of public discontent, protests and strikes.

Before national data trickled in, a Reuters survey of analysts pointed to inflation slowing to 9.7 percent in December from 10 percent in November. More recent estimates, including those of Pantheon Macroeconomics’ economist Claus Vistesen, put the figure around 9 percent.

Slower price rises will be welcome in Berlin, where government popularity has fallen massively ahead of key regional elections. Increasing numbers of voters fear inflation will undermine private wealth, a key survey showed. Germany's ruling coalition is falling in opinion polls and is on track to lose its majority in the parliament.

In France, the government is keeping a close watch on inflation as it prepares to launch a highly sensitive pension reform next week, framing it as part of a broader effort to improve the country’s economy and boost growth. While price rises in France have been lower than in most eurozone countries thanks to massive government support, the cost of living remains people’s No. 1 concern for the new year, according to opinion polls.

The government this week announced new measures to help small businesses, including the country’s cherished bakeries, cope with soaring energy bills.

Still, President Emmanuel Macron on Thursday struck a cautionary tone. “We're probably not at peak inflation yet,” he said. “We will have prices that go up.”

European Central Bank President Christine Lagarde has sounded equally circumspect.

She has said inflation may jump again in January and February, when previous spikes in energy prices are expected to reach the retail level, before coming down more sustainably later this year.

ECB forecasts from December still show inflation averaging 6.3 percent this year.


European Central Bank President Christine has come under fire from governments fearing the central bank’s tightening will push the eurozone economy into a deeper than necessary recession

And while governments may feel pressure on them is easing, the same can hardly be said for the ECB.

Lagarde has come under fire from governments fearing the central bank’s tightening will push the eurozone economy into a deeper-than-necessary recession, adding to the economic hardship of disgruntled voters.

Falling inflation at the same time as slowing economic activity will expose Lagarde to heftier criticism against her tightening course. Italy, under new Prime Minister Giorgia Meloni, has been particularly outspoken, with senior ministers attacking December's 0.5 percent interest rate hike and ECB pledges to do more as "baffling," "crazy" and “worrying."

While inflation coming down faster than expected may allow the Governing Council to raise interest rates less aggressively overall, the central bank will not shy away from further tightening as core inflation — which filters out volatile components such as food and energy — may still be on the rise and is running at more than three times the ECB’s 2 percent target.

ING economist Carsten Brzeski said the current inflation environment will likely see the ECB raise rates at the next two meetings by a total of one percentage point. It is only after new inflation forecasts become available in March that there could be momentum to pause the hiking cycle, he added. Markets are currently betting on a policy rate of 3.5 percent by mid-year, up from 2 percent now.

As Lagarde put it in December: “Anybody who thinks that this is a pivot for the ECB is wrong. We’re not pivoting, we’re not wavering.”

Newsletter

Related Articles

0:00
0:00
Close
Head of UK Budget Watchdog Resigns After Premature Leak of Reeves’ Budget Report
Car-sharing giant Zipcar to exit UK market by end of 2025
Reports of Widespread Drone Deployment Raise Privacy and Security Questions in the UK
UK Signals Security Concerns Over China While Pursuing Stronger Trade Links
Google warns of AI “irrationality” just as Gemini 3 launch rattles markets
Top Consultancies Freeze Starting Salaries as AI Threatens ‘Pyramid’ Model
Macron Says Washington Pressuring EU to Delay Enforcement of Digital-Regulation Probes Against Meta, TikTok and X
UK’s DragonFire Laser Downs High-Speed Drones as £316m Deal Speeds Naval Deployment
UK Chancellor Rejects Claims She Misled Public on Fiscal Outlook Ahead of Budget
Starmer Defends Autumn Budget as Finance Chief Faces Accusations of Misleading Public Finances
EU Firms Struggle with 3,000-Hour Paperwork Load — While Automakers Fear De Facto 2030 Petrol Car Ban
White House launches ‘Hall of Shame’ site to publicly condemn media outlets for alleged bias
UK Budget’s New EV Mileage Tax Undercuts Case for Plug-In Hybrids
UK Government Launches National Inquiry into ‘Grooming Gangs’ After US Warning and Rising Public Outcry
Taylor Swift Extends U.K. Chart Reign as ‘The Fate of Ophelia’ Hits Six Weeks at No. 1
250 Still Missing in the Massive Fire, 94 Killed. One Day After the Disaster: Survivor Rescued on the 16th Floor
Trump: National Guard Soldier Who Was Shot in Washington Has Died; Second Soldier Fighting for His Life
UK Chancellor Reeves Defends Tax Rises as Essential to Reduce Child Poverty and Stabilise Public Finances
No Evidence Found for Claim That UK Schools Are Shifting to Teaching American English
European Powers Urge Israel to Halt West Bank Settler Violence Amid Surge in Attacks
"I Would Have Given Her a Kidney": She Lent Bezos’s Ex-Wife $1,000 — and Received Millions in Return
European States Approve First-ever Military-Grade Surveillance Network via ESA
UK to Slash Key Pension Tax Perk, Targeting High Earners Under New Budget
UK Government Announces £150 Annual Cut to Household Energy Bills Through Levy Reforms
UK Court Hears Challenge to Ban on Palestine Action as Critics Decry Heavy-Handed Measures
Investors Rush Into UK Gilts and Sterling After Budget Eases Fiscal Concerns
UK to Raise Online Betting Taxes by £1.1 Billion Under New Budget — Firms Warn of Fallout
Lamine Yamal? The ‘Heir to Messi’ Lost to Barcelona — and the Kingdom Is in a Frenzy
Warner Music Group Drops Suit Against Suno, Launches Licensed AI-Music Deal
HP to Cut up to 6,000 Jobs Globally as It Ramps Up AI Integration
MediaWorld Sold iPad Air for €15 — Then Asked Customers to Return Them or Pay More
UK Prime Minister Sir Keir Starmer Promises ‘Full-Time’ Education for All Children as School Attendance Slips
UK Extends Sugar Tax to Sweetened Milkshakes and Lattes in 2028 Health Push
UK Government Backs £49 Billion Plan for Heathrow Third Runway and Expansion
UK Gambling Firms Report £1bn Surge in Annual Profits as Pressure Mounts for Higher Betting Taxes
UK Shares Advance Ahead of Budget as Financials and Consumer Staples Lead Gains
Domino’s UK CEO Andrew Rennie Steps Down Amid Strategic Reset
UK Economy Stalls as Reeves Faces First Budget Test
UK Economy’s Weak Start Adds Pressure on Prime Minister Starmer
UK Government Acknowledges Billionaire Exodus Amid Tax Rise Concerns
UK Budget 2025: Markets Brace as Chancellor Faces Fiscal Tightrope
UK Unveils Strategic Plan to Secure Critical Mineral Supply Chains
UK Taskforce Calls for Radical Reset of Nuclear Regulation to Cut Costs and Accelerate Build
UK Government Launches Consultation on Major Overhaul of Settlement Rules
Google Struggles to Meet AI Demand as Infrastructure, Energy and Supply-Chain Gaps Deepen
Car Parts Leader Warns Europe Faces Heavy Job Losses in ‘Darwinian’ Auto Shake-Out
Arsenal Move Six Points Clear After Eze’s Historic Hat-Trick in Derby Rout
Wealthy New Yorkers Weigh Second Homes as the ‘Mamdani Effect’ Ripples Through Luxury Markets
Families Accuse OpenAI of Enabling ‘AI-Driven Delusions’ After Multiple Suicides
UK Unveils Critical-Minerals Strategy to Break China Supply-Chain Grip
×