This increase in inflation marks a significant decline from a peak of 10.6% in October 2022, largely due to aggressive interest rate hikes by the ECB.

The rise in inflation is influenced by statistical base effects, as lower figures from the previous year were replaced by higher, albeit modest, current figures.

Energy prices decreased by 1.9% year-on-year, but this was offset by a 3.9% increase in service sector prices, highlighting the complexities of current inflation dynamics.

Core inflation, which the ECB closely monitors, remained stable at 2.7%, reflecting a slight decrease in service costs countered by rising goods inflation.

As a response to these inflation trends, investors are anticipating a series of rate cuts through at least mid-2025, with projections suggesting a drop in the deposit rate to 1.75% by the end of 2025.

The ECB is expected to consider an interest rate cut at its upcoming meeting on December 12, 2024, with debates ongoing about whether to implement a 25 or 50 basis point reduction.

Markets are currently leaning towards a smaller cut of 25 basis points, with less than a 10% chance of a larger move, although these expectations have been fluctuating.

In November 2024, inflation in the euro zone rose to 2.3%, surpassing the previous month's rate of 2.0% and the European Central Bank's (ECB) target of 2%.

Inflation in Germany, the largest economy in the euro zone, remained steady at 2.4%, which could influence the ECB's decision-making process regarding rate cuts.

High central bank rates, while effective in reducing inflation by increasing borrowing costs, also pose risks to economic growth by dampening demand.

Trade policy uncertainties, particularly under the incoming US administration, add to the challenges faced by the Eurozone's export-driven economy.

The European Commission projects Eurozone economic growth at 0.8% for 2024 and 1.3% for 2025, suggesting a cautious outlook amid these inflationary pressures.