According to the European statistics bureau, Luxembourg had one of the lowest inflation rates at the end of the year (6.2%, compared to 5.4% in December 2021. It had peaked in July at 9.3%. France (6.7%) and Spain (5.6%) were also on this end of the inflation spectrum. Lithuania (20%) and Latvia (20.7%) had the highest inflationary rates in December, with Latvia seeing it nearly triple over the last 12 months (7.9%).

Energy (25.7%) had the highest rate among the main components of euro area inflation, though it also witnessed a sharp decrease compared to November 2022 (34,9%) amid unusually warm temperatures. The other components--food, alcohol and tobacco, non-energy industrial goods and services--only saw mild improvements in their rate (around -0.2%), so the drop can be attributed to the energy prices, which have returned to pre-war levels.

However, as the underlines, core inflation, which excludes more volatile food and energy prices, rose from 5% to 5.2%. Core prices rose by 0.6% over one month too, showing that lower energy costs could go down without addressing underlying pressures. The eurozone should however be able to return to the European Central Bank’s headline inflation target of 2% faster than anticipated.