FRANKFURT (AP) – Inflation in the 20 countries that use the euro currency rose in November – but that likely won’t stop the European Central Bank from cutting interest rates as the prospect of new United States tariffs from the incoming Trump administration adds to the gloom over weak growth.
The European Union’s (EU) harmonised index of consumer prices stood up 2.3 per cent in the year to November, up from 2.0 per cent in October, the EU statistics agency Eurostat reported yesterday.
Energy prices fell 1.9 per cent from a year ago, but that was offset by price increases of 3.9 per cent in the services sector, a broad category including haircuts, medical treatment, hotels and restaurants, and sports and entertainment.
Inflation has come down a long way from the peak of 10.6 per cent in October 2022 as the ECB quickly raised rates to cool off price rises.
It then started cutting them in June as worries about growth came into sharper focus.
High central bank benchmark rates combat inflation by influencing borrowing costs throughout the economy.
Higher rates make buying things on credit – whether a car, a house or a new factory – more expensive and thus reduce demand for goods and take pressure off prices.
However, higher rates can also dampen growth.
