The EU's statistics agency published its eurozone inflation figures for December on Friday, showing a modest reduction in the pace of consumer price increases for the second month in a row. 

Inflation for the 19 countries using the euro stood at 9.2% year-on-year in December 2022, with the slower rate of increase attributable in no small part to energy prices easing off from their summer and autumn peaks.

In the meantime, 20 countries use the euro. But new entry Croatia only joined the currency bloc on January 1 this year and so is not part of the dataset.

Inflation for the eurozone peaked in October 2022 at 10.6%, dipped to 10.1% in November and now to 9.2% — the lowest it has been since August. 

However, it remains well above the European Central Bank's (ECB) target level of 2% inflation. 

Energy prices still the main driver, but fell fairly fast mid-winter

Russia's invasion of Ukraine in February last year seriously exacerbated pre-existing inflationary pressures caused in part by the COVID pandemic. 

In particular, energy prices were driven much higher by the uncertainty as Europe, a huge buyer of Russian oil and gas, imposed sanctions on Moscow and started looking to source alternative energy elsewhere. 

In December, energy prices in the eurozone were 25.7% higher than the same month the previous year — more than double the aggregate rate of inflation. However, in November they were 34.9% higher and in October 41.5% higher. 

Natural gas prices have slipped from their all-time highs in late summer for a variety of reasons. Mainly, these were the months when European countries, Germany included, were scrambling to fill up gas storage facilities ready for winter.  Most European storage facilities are now brimming, while a relatively warm winter and a degree of consumer abstinence is also helping reduce demand.

Food price gains, the other main factor driving inflation, remained more stable, at rates slightly higher than overall inflation. In December 2022 aggregate food prices were 13.8% higher in the eurozone than the same month in 2021. 

Could the peak be behind us? 

Like most central banks around the world, the ECB has been increasing interest rates in a bid to combat inflation, although it began this process later, and from a lower baseline, than the more proactive Federal Reserve in the US. 

The slowing pace of inflation is a trend observable elsewhere as well. In the US, for instance, consumer price increases peaked earlier, in June last year, at 9.1%, and by November they had already retreated to 7.1%. 

German inflation dipped under 9% in December according to its statistics agency, Destatis.

The Fed, the ECB and other central banks have said they will continue to take steps to try to bring inflation back down to their 2% year-on-year target — although they have also started to hint that they might slow the pace of interest rate rises in the short or medium term if continued improvement is observed. 

msh/wmr (AFP, AP, Reuters)