London Daily

Focus on the big picture.
Monday, Jan 26, 2026

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
WhatsApp Develops New Meta AI Features to Enhance User Control
Germany Considers Gold Reserves Amidst Rising Tensions with the U.S.
Michael Schumacher Shows Significant Improvement in Health Status
Greenland’s NATO Stress Test: Coercion, Credibility, and the New Arctic Bargaining Game
Diego Garcia and the Chagos Dispute: When Decolonization Collides With Alliance Power
Trump Claims “Total” U.S. Access to Greenland as NATO Weighs Arctic Basing Rights and Deterrence
Air France and KLM Suspend Multiple Middle East Routes as Regional Tensions Disrupt Aviation
U.S. winter storm triggers 13,000-plus flight cancellations and 160,000 power outages
Poland delays euro adoption as Domański cites $1tn economy and zloty advantage
White House: Trump warns Canada of 100% tariff if Carney finalizes China trade deal
PLA opens CMC probe of Zhang Youxia, Liu Zhenli over Xi authority and discipline violations
ICE and DHS immigration raids in Minneapolis: the use-of-force accountability crisis in mass deportation enforcement
UK’s Starmer and Trump Agree on Urgent Need to Bolster Arctic Security
Starmer Breaks Diplomatic Restraint With Firm Rebuke of Trump, Seizing Chance to Advocate for Europe
UK Finance Minister Reeves to Join Starmer on China Visit to Bolster Trade and Economic Ties
Prince Harry Says Sacrifices of NATO Forces in Afghanistan Deserve ‘Respect’ After Trump Remarks
Barron Trump Emerges as Key Remote Witness in UK Assault and Rape Trial
Nigel Farage Attended Davos 2026 Using HP Trust Delegate Pass Linked to Sasan Ghandehari
Gold Jumps More Than 8% in a Week as the Dollar Slides Amid Greenland Tariff Dispute
BlackRock Executive Rick Rieder Emerges as Leading Contender to Succeed Jerome Powell as Fed Chair
Boston Dynamics Atlas humanoid robot and LG CLOiD home robot: the platform lock-in fight to control Physical AI
United States under President Donald Trump completes withdrawal from the World Health Organization: health sovereignty versus global outbreak early-warning access
FBI and U.S. prosecutors vs Ryan Wedding’s transnational cocaine-smuggling network: the fight over witness-killing and cross-border enforcement
Trump Administration’s Iran Military Buildup and Sanctions Campaign Puts Deterrence Credibility on the Line
Apple and OpenAI Chase Screenless AI Wearables as the Post-iPhone Interface Battle Heats Up
Tech Brief: AI Compute, Chips, and Platform Power Moves Driving Today’s Market Narrative
NATO’s Stress Test Under Trump: Alliance Credibility, Burden-Sharing, and the Fight Over Strategic Territory
OpenAI’s Money Problem: Explosive Growth, Even Faster Costs, and a Race to Stay Ahead
Trump Reverses Course and Criticises UK-Mauritius Chagos Islands Agreement
Elizabeth Hurley Tells UK Court of ‘Brutal’ Invasion of Privacy in Phone Hacking Case
UK Bond Yields Climb as Report Fuels Speculation Over Andy Burnham’s Return to Parliament
America’s Venezuela Oil Grip Meets China’s Demand: Market Power, Legal Shockwaves, and the New Rules of Energy Leverage
TikTok’s U.S. Escape Plan: National Security Firewall or Political Theater With a Price Tag?
Trump’s Board of Peace: Breakthrough Diplomacy or a Hostile Takeover of Global Order?
Trump’s Board of Peace: Breakthrough Diplomacy or a Hostile Takeover of Global Order?
The Greenland Gambit: Economic Genius or Political Farce?
The Greenland Gambit: Economic Genius or Political Farce?
The Greenland Gambit: Economic Genius or Political Farce?
Will AI Finally Make Blue-Collar Workers Rich—or Is This Just Elite Tech Spin?
Prince William to Make Official Visit to Saudi Arabia in February
Prince Harry Breaks Down in London Court, Says UK Tabloids Have Made Meghan Markle’s Life ‘Absolute Misery’
Malin + Goetz UK Business Enters Administration, All Stores Close
EU and UK Reject Trump’s Greenland-Linked Tariff Threats and Pledge Unified Response
UK Deepfake Crackdown Puts Intense Pressure on Musk’s Grok AI After Surge in Non-Consensual Explicit Images
Prince Harry Becomes Emotional in London Court, Invokes Memory of Princess Diana in Testimony Against UK Tabloids
UK Inflation Rises Unexpectedly but Interest Rate Cuts Still Seen as Likely
AI vs Work: The Battle Over Who Controls the Future of Labor
Buying an Ally’s Territory: Strategic Genius or Geopolitical Breakdown?
AI Everywhere: Power, Money, War, and the Race to Control the Future
Trump vs the World Order: Disruption Genius or Global Arsonist?
×