In November, European inflation was pleasantly surprised by falling to 2.4%, marking the lowest point in over 2 years and offering some relief.
The decline in energy costs helped alleviate the cost-of-living crisis, although higher interest rates are putting pressure on the economy’s growth.
Eurozone inflation saw a drop from 2.9% in October, a significant difference from the peak of 10.6% in October 2022 during the energy crisis.
The present inflation rate aligns closely with the European Central Bank’s 2% target, achieved through successive interest rate hikes since the summer of 2022.
Despite achieving lower inflation, the tradeoff is stagnation in economic growth, as evidenced by core inflation (excluding fuel and food prices) decreasing to 3.6% in November.
Germany, Europe’s largest economy, saw a drop in annual inflation to 2.3% in November, facing an additional budget crisis due to the energy crunch and disruptions in Russian natural gas supplies, following Western sanctions over the Ukraine invasion.