With headline inflation decelerating to 2.0% year-on-year, down from 2.1% in November, the Eurozone's December 2025 CPI flash forecast exactly matched the European Central Bank's symmetric 2% target for the first time since mid-2025. Excluding volatile energy, food, alcohol, and tobacco, Core CPI cooled to 2.3% from 2.4%, coming in below the 2.4% consensus forecast. This softer-than-expected core reading underlines continued disinflationary pressures.
Along with a small increase in food, alcohol, and tobacco inflation to 2.6%, key drivers included a sharp -1.9% year-on-year drop in energy prices, which greatly contributed to the headline slowdown. Reflecting incremental moderation amid a stronger euro and falling worldwide commodity prices, service inflation—the unrelenting source of upward pressure—edged slightly to 3.4% from 3.5%.
Calmly reacting to the data, markets saw equities hold steady, and the euro gained ground as volatility decreased. The numbers support expectations for ECB patience on interest rates, pointing that inflation is definitely on track toward persistent stability at the targeted level without prompt need for policy changes.


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