Consumer prices rose 2.2% in November compared with a year earlier, up from 2.1% in October and slightly above the median forecast of economists surveyed by Bloomberg. Core inflation, that beloved measure designed to reassure policymakers that nothing is truly on fire, remained stuck at 2.4%. At the same time, services, the ECB’s favourite litmus test of domestic pressures, registered a faint acceleration.
After the post-pandemic surge, inflation across the euro area’s twenty economies has now hovered near the ECB’s 2% target for nine months, with underlying pressures easing as well. However, at the glacial pace one expects from a continent that negotiates interest rates as if they were constitutional reforms.
Of course, the headline masks wildly divergent national realities, a patchwork reflecting Europe’s charming habit of sharing a currency while living in entirely different economic universes. Inflation quickened in Germany, froze in France, softened in Spain and Italy; one continent, four narratives, and a single central bank pretending coherence.
Christine Lagarde, ever the serene conductor of this monetary orchestra, reiterated last week that policy is “in a good place”, a phrase that in ECB-speak means: we have no idea, but we refuse to panic in public. She insists rates are “set appropriately”. Investors and economists dutifully nod along, predicting that the deposit rate will remain at 2%, unchanged yet again, after being cut from its peak of 4% through eight successive quarter-point reductions.
December’s meeting will unveil new economic projections, including a first glimpse of 2028. Earlier forecasts projected inflation dipping briefly below 2%, a phenomenon likely reinforced by delays in the European Union’s revamped carbon-pricing system. However, several officials have already warned, with admirable pre-emptive caution, not to take these models too seriously.
Among the drivers of persistent price pressure, wage catch-up from past inflation remains the primary culprit in services. Yet the ECB’s own collective-bargaining indicators hint at more moderate wage growth ahead, offering policymakers the illusion — however fleeting — of being in control.
Bloomberg Economics puts it politely: services inflation remains a “major concern” because it reflects local cost pressures. In less diplomatic language: Europe is expensive because Europeans cost money. Still, they expect the broader downward trend to continue as wage growth normalises.
The relatively benign inflation backdrop, paired with an economy finally showing signs of forward momentum after months of inertia, has led most analysts to predict that rates will remain unchanged until 2026. It is a forecast delivered with confidence, though everyone knows such confidence collapses the moment a trade conflict flares, the Middle East shifts, or Washington sneezes.
ECB Vice-President Luis de Guindos summarised the mood neatly: markets expect stability, neither hikes nor cuts, but “given uncertainty”, the ECB remains open to adjustments. In other words, anything could happen, but we’d rather not talk about it.
For now, the message is that the ECB is calm, composed, and perfectly satisfied with its handiwork, a message delivered with that uniquely European mixture of self-congratulation and subdued dread, the monetary equivalent of saying all is well while discreetly scanning the horizon for smoke.