Euro Zone Inflation Hits Target, Future Uncertainty Looms

Inflation in the euro zone has reached the European Central Bank's target of 2% as expected, driven by lower energy costs. While underlying prices slightly eased, the ECB is expected to maintain its current rate policy amid uncertainty and mixed projections for inflation in the coming months.

Inflation in the euro zone has slowed to 2% in December, in line with expectations and hitting the European Central Bank's target amid falling energy costs, according to Eurostat data released on Wednesday.

The underlying inflation rate, which excludes volatile elements such as food and energy, also eased slightly to 2.3%, down from 2.4% a month earlier, due to a marginal slowdown in services and industrial goods inflation. This marks a continuation of price growth around the ECB's target, with expectations of similar trends in the coming years.

While some policymakers express concerns over potential persistent low inflation affecting wage demands, the ECB remains confident the dip is temporary, mainly driven by energy price volatility. Upcoming ECB meetings will address these issues, with significant attention on external factors such as energy costs, fiscal developments in Germany, and global trade dynamics.

(With inputs from agencies.)