Eurozone annual inflation rises to 2.4% in December amid expectations of new monetary policy

The annual inflation rate in the eurozone rose for the third month in a row, reaching 2.4% in December, compared to 2.2% in November, according to a report issued by the European statistics agency Eurostat.

Core inflation, which strips out the effects of energy and food, held steady at 2.7% for the fourth straight month, in line with economists’ expectations.

Services inflation also rose to 4% from 3.9% the previous month, reflecting continued pressure in the sector.

Headline inflation was widely expected to rise after falling to a record low of 1.7% in September, as the base effects of lower energy prices that had helped to dampen inflation in previous months faded.

The European Central Bank is waiting to follow up on the impact of these increases, especially in the core inflation reading and the continued pressures in the services sector, as market expectations indicate the possibility of reducing interest rates from 3% to 2% through a series of cuts during the current year.

In the Eurozone’s largest economy, Germany’s inflation rate was 2.9% in December, beating market expectations, according to data published last week. In contrast, France’s inflation rate was 1.8%, below the 1.9% forecast in a Reuters poll.

Callanish Capital’s Hugh Bathgate told CNBC that ECB policymakers will not be overly concerned about the recent rise in inflation rates, as long as they are in line with expectations.

“There is more predictability in the economic data we are seeing at the moment… The direction of interest rates in Europe seems more stable and predictable than in the UK, for example,” Bathgate added.

With inflation still on the rise, the key question is how the European Central Bank will respond to these developments.

Its interest rate decisions will play a crucial role in determining the region’s economic path in the coming months, with the impact of policies on different sectors closely monitored.