Inflation in the eurozone has returned to the European Central Bank (ECB) target level, supporting policymakers’ view that interest rates can remain at current levels unless there is a significant change in the economic outlook.The consumer price index rose 2% year-on-year in December, down from 2.1% the previous month and in line with economists’ expectations. Core inflation, which excludes volatile food and energy costs, slowed to 2.3%, while closely watched services inflation also eased.Price increases have fluctuated around the 2% target for more than six months, prompting the European Central Bank (ECB) to keep borrowing costs unchanged since June. Economists and investors do not expect any further action in the foreseeable future. Most policymakers agree that inflation is under control but remain cautious about the next steps, emphasizing that uncertainty persists in the global economy.Other factors that could cause inflation to deviate from the target include the emerging impact of U.S. tariffs, a strong euro, and fiscal expansion in Germany. Under its baseline scenario, the central bank expects inflation to average 1.9% in 2026, before falling further and then accelerating back to 2% in 2028.