Beijing, Jan 7 (Xinhua) -- The inflation slowdown in December 2025 in some major economies in the eurozone exceeded expectations, while economic growth remained stable, confirming that price pressures have gradually dissipated as expected by the European Central Bank, Xinhua reported.
As 2025 draws to a close, inflation in Germany has slowed significantly, and inflation in France and Spain has also ease.
Germany's initial December Consumer Price Index (CPI) rose by only 1.8% year-on-year, lower than the 2.1% expected in institutional surveys. The month-on-month figure was flat, also below the expected 0.3% increase. The harmonized CPI initial value, which is more closely watched by the European Central Bank, rose by 2.0% year-on-year, also lower than the expected 2.2%, and increased by only 0.2% month-on-month, which was also below the expected 0.4%. This confirms that price pressures in the euro zone's largest economy are easing rapidly. Among them, the inflation rate in North Rhine-Westphalia, Germany's most populous state, fell to 1.8% in December, the lowest level in five months. Carsten Brzeski, an economist at ING, said: "The slowdown in German inflation is also supported by the continued decline in producer and import prices, which is usually a good leading indicator of overall inflation." He added: "But in the long run, the upcoming fiscal stimulus measures should bring new inflationary pressures, at least in some industries."
Meanwhile, data released by France and Spain also showed that price pressures continued to ease, further adding to widespread signs of easing inflation in the euro zone.
The initial reading of France’s December CPI increased by 0.8% year-on-year, the lowest level in seven months, slightly below the expected 0.9%; the initial reading of the harmonized CPI increased by 0.7% year-on-year, also below the expected 0.8%. Looking at the details, the slowdown in inflation is mainly attributed to a more significant decline in energy prices, especially for petroleum products. On the other hand, the year-on-year increase in food prices has accelerated slightly to 1.7%, mainly reflecting the rise in the prices of fresh products. Meanwhile, inflation in the services sector has remained stable, with a year-on-year increase of 2.2% in December, continuing to maintain above the 2% threshold. In terms of the month-on-month comparison, the CPI increased by 0.1% after a 0.2% decrease in November, below the expected 0.2% increase, which was mainly driven by the seasonal rebound in service prices, especially in transportation services; the harmonized CPI also increased by 0.1% month-on-month.
The overall inflation data for the eurozone will be released on Wednesday, and economists expect the overall inflation rate to fall back to the 2% target level. Citibank economists said their more optimistic outlook for GDP growth in 2026 led to a slight increase in their core inflation forecast, but they still expect the core harmonized CPI to slow further to 1.8% in 2026.
According to its own forecasts, the ECB is predicting a series of inflation prints below target in the coming months, with inflation returning to target levels at the beginning of 2028.
The latest data has prompted investors to reprice the European Central Bank's interest rate path through 2026.CurrencyThe market's expectations for future interest rate hikes from the European Central Bank have significantly cooled, with current pricing showing a near-zero probability of rate hikes until December 2026 and a roughly 24% probability of rate hikes by March 2027.
Overall, the combination of data showing easing inflationary pressures and slowing growth has strengthened market expectations that the European Central Bank will maintain an accommodative stance for a longer period. European Central Bank Executive Board member Isabel Schnabel stated that borrowing costs are likely to remain stable for an extended period unless there is an unexpected shock.
