Inflation in Europe falls to 2.4%

30 November 2023, 10:34

The banking district in Frankfurt, Germany
The banking district in Frankfurt, Germany. Picture: PA

But the tradeoff is stalled economic growth.

Europeans again saw some relief as inflation dropped to 2.4% in November – the lowest in more than two years – as plummeting energy costs have eased a cost-of-living crisis but higher interest rates squeeze the economy’s ability to grow.

Inflation for the 20 countries using the euro currency fell from an annual 2.9% in October, according to numbers released on Thursday by Eurostat, the European Union’s statistics agency.

It is a far cry from the peak of 10.6% in October 2022 as an energy crisis left Europe’s households and businesses struggling to make ends meet.

The new figure is close to the European Central Bank (ECB)’s inflation target of 2% following a rapid series of interest rate hikes dating to summer 2022.

But the tradeoff is stalled economic growth.

It raises the expectations that the ECB will hold rates steady for the second time in a row at its next meeting on December 14.

ECB president Christine Lagarde reiterated this week that the bank would make decisions based on the latest data and keep rates high as long as needed to reach its inflation goal.

The ECB’s key rate has hit a record-high 4%.

“This is not the time to start declaring victory,” she said at a hearing in the European Parliament.

That is on stark display in Germany, Europe’s largest economy, which saw annual inflation fall to 2.3% this month from 3% in October.

But it is now dealing with a budget crisis — on top of being the world’s worst-performing major economy.

The energy crunch was especially hard on Germany, which relied on cheap natural gas from Russia to power its factories.

Moscow largely cut off supplies to Europe after western sanctions over the invasion of Ukraine, and companies are still facing the fallout.

Relief on their bills is at risk after a court ruling upended Germany’s spending plan and left the government scrambling to fill a 60 billion-euro (£51.8 billion) hole.

The larger eurozone has barely expanded this year, eking out 0.1% growth in the July-to-September quarter.

On Wednesday, the Organisation for Economic Co-operation and Development projected that this year’s muted growth of 0.6% would rise only to 0.9% next year.

“With a weakening economic outlook and disinflation, rate hikes should be off the table at the December meeting,” Carsten Brzeski, global head of macro at ING bank, said about the ECB.

“Given that the full impact of the tightening so far will still unfold in the coming months, the risk is even high that the ECB has already tightened too much,” he said in a research note.

By Press Association

Latest World News

See more Latest World News

Germany Russia Ukraine War

Leaked audio part of Russia’s ‘information war’ against West, says Germany

Benjamin Netanyahu

Cracks widen in Netanyahu’s government as top political rival arrives in US

A ceasefire in Gaza could come within next 24 hours as negotiators meet in Egypt to agree deal, Hamas has claimed.

Israel-Hamas talks reportedly break down as Kamala Harris calls for 'immediate ceasefire' in Gaza

Destroyed building

Death toll rises after block of flats destroyed in Russian attack

Star Wars and Gremlins actor, Mark Dodson, has died aged 64 following what sources describe as a ‘massive heart attack’.

Star Wars and Gremlins actor dead following ‘massive heart attack’ aged 64

Haiti Violence

Hundreds of inmates flee after armed gangs storm Haiti’s main prison

A ceasefire in Gaza could come within next 24 hours as negotiators meet in Egypt to agree deal, Hamas has claimed.

Gaza ceasefire could come 'within next 24 hours' as negotiators meet in Egypt to agree deal, Hamas claims

Air strike damage

Mother loses infant twins and husband in Israeli air strike

Scandinavian Airlines plane

Medical plane carrying Norway’s king departs Malaysia

Missing plane anniversary

Malaysia may renew search for flight MH370 one decade on

Doctors stage protest

Doctors stage massive demo in Seoul against medical school admissions policy

Shehbaz Sharif

Shehbaz Sharif elected as Pakistan’s prime minister

Researcher in sea

Coral researchers study how Hawaiian wildfire affected ‘foundation of life’

Satellite image of ship

Ship sinks in Red Sea days after Houthi attack

Election 2024 Trump

Donald Trump wins caucuses in Missouri and Idaho and sweeps Michigan convention

Election 2024 Trump

Trump takes another step towards nomination after Missouri and Michigan wins