Key Takeaways
- Eurozone inflation in November is expected to remain unchanged from October.
- The European Central Bank is widely expected to keep rates unchanged at its Dec. 18 meeting.
- The strong euro and US tariff effects are seen as exerting downward pressure on prices in Europe.
In data released on Dec. 2, eurozone inflation is forecast to be 2.1% higher than November 2024, according to FactSet consensus estimates, unchanged from October’s reading.
Core inflation, which excludes volatile components such as energy and food costs, is expected to have risen by 2.4% year over year in November, also in line with October’s reading of 2.4%.
The European Central Bank is widely expected to leave the key interest rate unchanged at 2% on Dec. 18, with only a slim chance of a quarter-point rate cut implied by swap trading data.
In October 2025, services inflation was the main driver of the Harmonized Index of Consumer Prices (HICP) at an annual rate of 3.4%, which was the highest reading since April.
“Services could pick up slightly, while the ECB maintains its ‘good place’ narrative,” says Bastian Freitag, head of fixed income Germany at Rothschild & Co Wealth Management.
“We do not expect any changes in December—and even for 2026, we do not see any major risks of a deviation from the inflation target so far.”
Wage growth is moderating, he adds. “Negotiated wages fell significantly in the third quarter to 1.9% year on year, from 4.0% previously—a decline that is consistent with the ECB’s 2% inflation target.”
Inflation Expected to Remain Low in the Eurozone
Carsten Roemheld, capital market strategist at Fidelity, says a key reason for falling inflation rates is US tariff policy, which limits exports from many parts of the world to the US.
“This creates an oversupply in other regions because the capacities not delivered to the US need new sales markets. This will keep inflationary pressure low in the eurozone and other parts of the world for the foreseeable future.”
Currency markets could reinforce the trend as a weaker US dollar may even nudge eurozone inflation below the ECB’s 2% target.
At the same time, some policymakers say inflation could rise again. ECB executive board member Isabel Schnabel says that eurozone inflation risks have “tilted slightly upward”, as the economy gains momentum and governments ramp up military and infrastructure spending.
No ECB Rate Cut Expected in December
Fidelity’s Roemheld expects the ECB to continue its interest rate pause.
“Futures markets are not pricing in any ECB interest rate measures in the coming 12 months. However, we assume that the ECB could possibly cut interest rates if the economy continues to perform weakly.”
The ECB began easing interest rates in June 2024, and has since delivered eight rate cuts, lowering the deposit rate from 4.00% to 2.00%. Since June 11, the three key policy rates are:
- Deposit Facility Rate: 2.00%
- Main Refinancing Operations: 2.15%
- Marginal Lending Facility: 2.40%
Eurozone growth is set to remain modest, with analysts expecting only a slight uptick in 2026 as the effects of Germany’s fiscal stimulus begin to show up. The ECB’s September projections foresaw real GDP rising 1.2% in 2025, 1.0% in 2026 and 1.3% in 2027.
At the December meeting, ECB staff will be presenting new forecasts on eurozone inflation and growth, including a 2028 projection for the first time.
