Belgium posted the joint-lowest year-on-year inflation rate in the eurozone in December despite registering the highest monthly price rise, according to flash estimates published by the EU's official statistics agency Eurostat on Friday.
Annual inflation in Belgium rose from -0.8% in November to 0.5% in December – the joint-lowest rate in the currency union together with Italy, where inflation dropped from 0.6% to 0.5%. In November, Belgium was the only EU Member State to register a negative annual rate.
Month-on-month inflation in Belgium increased by 1.1% from November to December: more than two times faster than in Austria and Finland, which jointly recorded the second-highest monthly rate increases in the eurozone (0.5%). Belgium's monthly increase was also more than five times greater than the eurozone average of 0.2%.
However, Belgium's annual inflation rate remained well below the eurozone average, which rose from 2.4% to 2.9% – the first uptick since April last year but slightly below economists' forecast of 3%. Inflation in Germany, the eurozone's largest economy, increased from 2.3% to 3.8%.
Core inflation, which strips out volatile food and energy prices and is widely considered to offer a better assessment of underlying price pressures, fell from 3.6% to 3.4%.
'Widely anticipated'
Jack Allen-Reynolds, Deputy Chief Eurozone Economist at Capital Economics, suggested that the uptick in the headline rate will have little impact on European Central Bank (ECB) policy.
"December's jump in headline inflation in the eurozone was widely anticipated and entirely due to a base-effects driven increase in energy inflation, so it won't alter ECB policymakers' views on the outlook for monetary policy," he told AFP.
The ECB has hiked interest rates ten times over the past year-and-a-half in its efforts to curb soaring prices, bringing its benchmark deposit facility rate from -0.5% to a record high of 4.0%.
Arguably, the spike in the headline rate confirms ECB President Christine Lagarde's previous warnings that Europe's inflation crisis is far from over, despite inflation currently being well below October 2022's peak of 10.6%. (Belgium's inflation rate peaked at 13.1% in the same month.)
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"Should we lower our guard?" Lagarde said at a press conference following the ECB's latest meeting in mid-December. "We asked ourselves that question. No, we should absolutely not lower our guard."
Lagarde also poured cold water on the suggestion that rate cuts are imminent, noting that the ECB's Governing Council, the bank's main decision-making body, "did not discuss rate hikes at all" during its December meeting.
She spoke of the need for a smooth transition between hikes and cuts: "It's like solid, liquid, and gas: you don't go from solid to gas without going through the liquid phase."
The ECB's next rate decision meeting is on 25 January. According to the ECB's latest forecast, headline inflation is set to fall to an average rate of 2.7% this year but will only drop below the ECB's 2% target in 2026.
