Inflation

What is the current inflation situation in Slovakia and the euro area?

• Prices of goods and services in Slovakia continue to rise noticeably faster than the euro area average, largely due to recently adopted fiscal consolidation measures.
• After falling sharply in 2024, Slovakia’s headline inflation accelerated this year due to the VAT increase, the new sugary-drinks tax and other government consolidation measures. We expect the average inflation rate to slightly exceed 4 % in 2025.
• In November, Slovakia continued to have one of the highest inflation rates in the euro area, with only Austria, Croatia and Estonia recording faster price growth. According to Eurostat’s flash estimate, prices in Slovakia rose by 3.8 % compared with November 2024, while inflation in the euro area edged up to 2.2 %, still near the European Central Bank’s goal.
• The National Bank of Slovakia projects inflation to slow next year, though increases in regulated energy prices will prevent a steeper decline.

The European Central Bank’s response to inflation

• The ECB responded to the gradual decline in inflation with eight interest rate cuts since the summer of 2024. At the last three monetary policy meetings, most recently in late October, the Governing Council unanimously decided to leave all key interest rates unchanged.
• The main policy rate remains at 2 %, its lowest level since December 2022.
• The decision is underpinned by a resilient economy and a favourable inflation outlook. According to the ECB’s autumn projections, average price growth this year will reach 2.1 % and, over the next two years, inflation will slow to below the 2 % target.
• Future monetary policy decisions will, as before, depend on incoming economic data and are not pre-committed. The Governing Council will next discuss interest rates on 18 December, when the new ECB macroeconomic projections will also be available.