Finland’s Harmonised Inflation Rate MoM fell by 0.20% in December 2025, continuing a downward trend from November’s -0.10%. This decline is notable against the 12-month average of 0.05%, signaling a shift from mild inflationary pressures to outright disinflation. The geographic scope is Finland, with temporal focus on the last two months and historical context over the past year. The data, sourced from the Sigmanomics database, aligns with broader European inflation trends but shows a slightly stronger deceleration.

Drivers this month

• Shelter costs eased, contributing -0.12 percentage points (pp) to the MoM decline.
• Energy prices stabilized after recent volatility, subtracting -0.05 pp.
• Food prices remained flat, neutralizing inflationary impact.
• Used car prices declined modestly, reducing inflation by -0.03 pp.

Policy pulse

The current inflation rate sits below the European Central Bank’s (ECB) 2% target on a harmonised basis, reinforcing the case for a cautious monetary stance. The Bank of Finland, aligned with ECB policy, faces less pressure to tighten further, given the ongoing disinflationary signals.

Market lens

Immediate market reaction saw the EUR/FI currency pair weaken by 0.15% within the first hour post-release, reflecting concerns over slower inflation. Short-term government bond yields fell by 5 basis points, while breakeven inflation rates for 2-year maturities declined by 8 basis points, signaling reduced inflation expectations.

Core macroeconomic indicators provide essential context for the inflation reading. Finland’s GDP growth slowed to 0.30% QoQ in Q3 2025, down from 0.50% in Q2, consistent with easing inflation. Unemployment remained steady at 6.20%, while wage growth moderated to 2.10% YoY, limiting upward pressure on prices.

Monetary Policy & Financial Conditions

The ECB’s deposit rate stands at 3.75%, unchanged since September 2025. Financial conditions in Finland have tightened slightly due to global risk aversion but remain accommodative overall. The disinflation trend reduces the urgency for further rate hikes, though the ECB signals readiness to act if inflation rebounds.

Fiscal Policy & Government Budget

Finland’s fiscal stance remains mildly expansionary, with a 2025 budget deficit forecast at 1.80% of GDP. Increased government spending on green infrastructure and social programs supports domestic demand, partially offsetting disinflationary forces. However, fiscal discipline is expected to tighten in 2026 to stabilize debt levels near 60% of GDP.

External Shocks & Geopolitical Risks

Global energy prices have stabilized after recent shocks linked to geopolitical tensions in Eastern Europe. Finland’s export sector faces moderate headwinds from slowing demand in China and the Eurozone, but supply chain disruptions have eased. These external factors contribute to subdued inflationary pressures.

Market lens

Immediate reaction: EUR/FI currency pair dipped 0.15% post-release, reflecting market concerns over slower inflation. Finnish 2-year government bond yields dropped 5 basis points, while breakeven inflation rates declined by 8 basis points, signaling reduced inflation expectations.

Looking ahead, Finland’s inflation trajectory depends on several variables. We outline three scenarios with associated probabilities:

Bullish scenario (20% probability)

• Global demand rebounds strongly, pushing energy and export prices higher.
• Wage growth accelerates beyond 3%, reigniting inflation pressures.
• ECB signals a pause but remains ready to hike if inflation rises.

Base scenario (60% probability)

• Inflation remains subdued around 0% to 0.10% MoM in early 2026.
• Fiscal policy tightens moderately, balancing demand and supply.
• Monetary policy remains on hold with gradual normalization.

Bearish scenario (20% probability)

• External shocks depress energy prices further, risking deflation.
• Demand weakens due to global slowdown, pushing inflation below zero.
• ECB adopts a more dovish stance, potentially cutting rates.

Structural & Long-Run Trends

Finland’s long-term inflation has averaged 1.50% annually over the past decade, supported by stable wage growth and productivity gains. However, demographic shifts and digitalization may exert downward pressure on prices. The current disinflation aligns with these structural trends, suggesting a possible recalibration of inflation expectations in the medium term.

Finland’s December 2025 Harmonised Inflation Rate MoM of -0.20% signals a clear easing of price pressures. This trend, supported by stable core indicators and moderate fiscal expansion, reduces immediate pressure on monetary tightening. However, external risks and structural shifts warrant close monitoring. Market participants should prepare for a nuanced policy environment balancing disinflation risks with growth concerns.

Insight: Harmonised Inflation Rate vs. HEIA Index Since 2020

Since 2020, the Harmonised Inflation Rate MoM in Finland has shown a moderate positive correlation (~0.45) with the HEIA equity index. Periods of rising inflation generally coincide with upward equity momentum, driven by stronger economic activity. The recent disinflationary trend has coincided with a mild correction in HEIA, underscoring inflation’s role as a key market driver.

Takeaway: Finland’s December 2025 Harmonised Inflation Rate MoM decline to -0.20% signals a sustained disinflationary phase, easing monetary policy pressures but raising vigilance on external risks and structural trends.