Euro zone inflation hits 2% in December, in line with forecasts

Euro zone inflation stood at 2% in December, flash data from Eurostat showed on Wednesday.

Economists polled by Reuters had expected the inflation rate to cool to 2%, in line with the European Central Bank’s (ECB) target. In November, the inflation rate stood at 2.1%.

Core inflation, which excludes more volatile energy, food, alcohol and tobacco prices, stood at 2.3% in the year to December, down from 2.4% in November, while the annual rate of services inflation cooled to 3.4%, compared with 3.5% in November.

The ECB held its key deposit facilityrate at 2% for the fourth consecutive time in December, having last cut rates in June.

The trim, which coincided witheuro zone inflation hitting 2%, was part of a rate-cutting cycle that has brought rates down from 2024’srecordhighof 4%.

Top ECB board members told CNBC late last year thatthe easing cycle is close to, or at its end,although the central bank has repeatedly said it will take a meeting-by-meeting and data dependent approach to rate setting.

The euro and Stoxx 600 were unchanged on Wednesday following the data release, although the inflation rate returning to the ECB’s target could signal further rate cuts ahead.

“The move should pleaseequity markets, as it gives the ECB yet another reason to cut interest rates further in 2026. That said,inflation has been hovering either side of the 2% level for most of last year, so today’s move is minor, but apositive,nonetheless,” Michael Field, chief equity strategist at Morningstar, said in emailed comments Wednesday.

“Central bankers walk a tightrope,attemptingto stimulate the economy without igniting inflation. But withinflation low and steady, they should be able to taketheir foot off the brake and lean towards morestimulussooner rather than later.”