Euro zone households could keep saving a large portion of their income to rebuild wealth lost to high inflation, the European Central Bank argued, suggesting lacklustre consumption will continue to weigh on growth in the near term.

Euro-area inflation accelerated last month, supporting the European Central Bank’s gradual approach to reducing interest rates, without derailing them altogether.

The pace of price rises in the euro zone's largest economy, Germany, hit a higher-than-expected 2.9% in December, according to figures published separately this week. Inflation in France meanwhile came in at 1.8% last month, below a Reuters analyst poll forecasting a 1.9% print.

The median respondent in the ECB's Consumer Expectations Survey expected prices to grow by 2.6% over the following 12 months in November, from 2.5% in October - marking the second increase in a row. The expectation for three years ahead was raised to 2.4% - the highest level since July - from 2.1%.

Euro zone inflation accelerated in December, an unwelcome but anticipated blip that is unlikely to derail further interest rate cuts from the European Central Bank.

Inflation in the eurozone rose further above the European Central Bank’s target in the final month of 2024, although that is unlikely to dissuade policymakers from lowering borrowing costs again this month to support a faltering economy.