The Eurozone’s Core Harmonized Index of Consumer Prices remained steady at 0.3% month-on-month in December. This aligns with figures reported in previous calculations, showing no change over the period.
On an annual basis, the Core Harmonized Index indicated stability, maintaining a consistent pace. The unchanged rate reflects ongoing economic conditions within the Eurozone.
Monitoring Inflation Across The Region
The data provided is part of efforts to monitor inflation across the region. It measures key price movements excluding volatile items like energy and food.
Overall inflation statistics play a role in economic planning and forecasting. Insights from these figures help anticipate trends impacting the Eurozone economy.
The lack of movement in the index may influence monetary policy decisions. Observers continue to analyse whether changes are needed to address economic conditions.
The latest data shows Eurozone core inflation from December 2025 was stubbornly unchanged, posting a 0.3% month-over-month increase. This annualizes to a rate of over 3.5%, which is significantly above the European Central Bank’s 2% target. We see this as a clear signal that underlying price pressures are not easing as quickly as hoped.
Market And Economic Implications
This persistent core reading pushes back against the market’s recent bets on rate cuts happening before the summer of 2026. Data shows that just last week, overnight index swaps were pricing in a nearly 40% chance of a first cut by June. We believe traders should now unwind positions that are reliant on early or aggressive ECB easing.
We expect interest rate futures to reprice over the coming weeks to reflect a more cautious ECB. This involves adjusting expectations for the Euribor and €STR benchmarks further out in the year. Selling futures contracts for the second quarter of 2026 could be a direct way to position for rates remaining higher for longer.
This inflation stickiness comes at a time when recent growth indicators, like Germany’s manufacturing PMI which printed at 48.9, suggest a slowing economy. This creates policy uncertainty, which is reflected in an uptick in the VSTOXX index, a measure of Eurozone equity volatility. We see value in buying options on bond futures, as this tension between fighting inflation and supporting growth could lead to sharp market moves.
From a currency perspective, a hawkish ECB relative to other central banks should be supportive for the euro. We recall how in 2025, widening rate differentials were a primary driver for the EUR/USD exchange rate. We are therefore considering long euro positions against currencies where inflation is decelerating more rapidly, such as the Australian dollar.
