07:47 AM EST, 01/08/2025 (MT Newswires) -- The eurozone flash HICP inflation for December picked up to 2.4% year over year from 2.2% in November, in line with consensus while core inflation held steady at 2.7% year over year, noted ABN Amro.

The rebound in headline inflation was driven largely by energy, with both the lower base from last year but also recent weakness in the euro contributing to higher gasoline prices, as well as higher natural gas and electricity prices with Europe running down its gas inventories somewhat faster than usual this winter, wrote the bank in a note.

Elsewhere, inflation dynamics were broadly unchanged, with goods inflation continuing to hold near zero, and food inflation holding at a benign 2.7%.

The main upward pressure on inflation continued to come from services inflation, which stayed at 4% year over year, although services inflation momentum -- measured by the three-month over threee-month annualized rate -- continued to cool, falling to 2.7% from 2.8%. ABN Amro thinks there could be some residual seasonality in the data, with a similar drop in services inflation observed late last year, and the bank expects services inflation to pick up again over the coming months given still-elevated wage growth in the eurozone, and with many services providers tending to raise prices in January.

However, ABN amro estimates this pickup to prove temporary and well within the broad trend of cooling inflation. Big picture, the bank sees headline inflation to resume its fall already from February as energy base effects fade, with the 2% target expected to be reached sustainably by April.

Core inflation is expected to stay more elevated in the near term due to services, with a more sustained fall expected around the middle of 2025.

Incoming inflation data continues to be broadly in line with the European Central Bank's forecasts, and given the ongoing subdued nature of the recovery -- and the downside risks -- ABN Amro predicts the ECB to continue cutting rates at coming meetings.

The next rate cut is expected at the Jan. 30 ECB Governing Council meeting, when ABN Amro forecasts the deposit rate to fall by 25bps to 2.75%.