Key Takeaways
- Overall inflation edged slightly higher year over year in November to reach 2.2%, above economists’ forecasts.
- Core inflation was unchanged from September and October and in line with forecasts of 2.4% year over year, driven largely by sticky services inflation.
- The odds of another rate cut at the ECB’s December meeting remain slim.
Consumer prices in the eurozone increased by 2.2% year over year in November, according to Eurostat’s flash estimate, up from October’s reading of 2.1%. This was above consensus estimates of 2.1%, but close to the European Central Bank’s 2% target.
Core inflation, which shows prices without volatile components such as energy and food costs, rose 2.4% year over year in November, in line with expectations and unchanged from the two prior months.
“Any upward movement has the potential to spook markets, particularly when investors are hoping for interest rate cuts from the European Central Bank. With the move up so marginal though, its likely investors will let this one slide,” says Michael Field, Morningstar’s chief European markets strategist. While core inflation is still 40 basis points ahead of the ECB’s 2% targeted rate, it has come down markedly over the course of the year, he adds. “From the ECB’s perspective, they will still consider this very much under control.”
Services Inflation Remains Key Driver
According to Eurostat’s estimates, services inflation is expected to have the highest annual rate in November at 3.5%, compared with 3.4% in October, which had marked the highest reading since April.
Food, alcohol & tobacco was up by 2.5%, unchanged from October. Non-energy industrial goods rose by 0.6%, also stable compared with October. Energy inflation was at -0.5%, compared with -0.9% in October. On a month over month basis, inflation fell by 0.3%.
Will the ECB Cut Rates in December?
With inflation hovering around the ECB’s target level, further interest rate cuts appear unlikely in the foreseeable future.
“The key takeaway from eurozone’s November flash inflation print today is that the ECB will remain on hold in December. Lower energy prices will drag headline inflation below 2% next year, but with core inflation sticky around 2.5%, the ECB will look past that,” says Daniel Kral, lead economist at Oxford Economics, on X.
Commerzbank chief economist Joerg Kraemer says: “Even though core inflation in the eurozone remained at 2.4% in November, prices have risen more slowly in the last three months when extrapolated to an annual rate. Core inflation should slowly fall towards 2% in the coming months.” Easing wage pressure suggests that underlying inflation should gradually decline in the months ahead.
“For market bulls hoping for another interest rate cut, today’s inflation reading will likely mean waiting until sometime in early 2026,″ Morningstar’s Field adds. “But with rates already very low, at just 2%, this certainly isn’t the end of the world for equity market investors, who should see lower rates benefit equity markets fully in 2026.”
A Mixed Picture Across the Eurozone
It was a mixed picture across countries in the eurozone, with annual inflation rates ranging from 0.2% in Cyprus to 4.7% in Estonia.
German inflation came in at 2.6%, sharply up from the prior month’s reading of 2.3% and the highest level since February 2025. French inflation remained unchanged at 0.8% year over year in October, while Italy and Spain posted annual rates of 1.1% and 3.1%, down from 1.3% and 3.2%, respectively.
