Preliminary data published by Eurostat showed that the eurozone annual inflation slowed in January, confirming economists' forecasts. Core inflation reached its lowest level since March 2022, but was slightly higher than expected, which is likely boosting the ECB's argument that rate cuts should not be rushed.
According to the report, the consumer price index rose by 2.8% per year after rising by 2.9% per year in December. Meanwhile, on a monthly basis, the consumer price index fell by 0.4%, offsetting the December increase (+0.2%).
Eurostat reported that the core consumer price index - energy, food, alcohol & tobacco - rose by 3.3% per year after an increase of 3.4% per year in December. Economists had expected an increase of 3.2% per annum.
The data showed that the annual growth of the overall consumer price index was due to an increase in the cost of food, alcohol & tobacco (+5.7% compared with +6.1% in December), services (+4.0% vs. +4.0%) and non-energy industrial goods (+2.0% vs. +2.5%). Meanwhile, energy prices fell by 6.3% per annum after declining by 6.7% per annum in December.
According to the latest survey of professional forecasters (SPF), headline HICP (harmonized index of consumer prices) inflation was expected to decline from 2.4% in 2024 to 2.0% in both 2025 and 2026. Expectations for 2024 were revised down by 0.3% and those for 2025 by 0.1%. Core HICP inflation was also revised down for 2024 and 2025. The ECB itself expects inflation to reach its 2% target only in 2025. Investors now see a combined 142 basis points of rate cuts this year, with the first step in April nearly fully priced in.