Eurozone Inflation, January 2025

Eurozone inflation accelerated to a hotter than expected 2.5% in January as energy costs jumped.

The economists voted by Reuters had expected an inflation print of 2.4% from December to January.

The so-called core inflation, which removes food, energy, alcohol and tobacco prices, appeared at 2.7% in January and has not changed since September. Meanwhile, the closely monitored service inflation print has been reduced by inches from 4% in December to 3.9% in January.

However, energy costs have jumped, rising 1.8% from a year ago. This is a significant increase from a 0.1% increase in December.

Jack Allen Reynolds, deputy Eurozone economist in capital economics, said that both energy prices and core inflation rates were higher than expected, but the decline in service inflation rates was lower than expected .

“Service inflation has been delayed by about 4% over a year,” he noted, saying it is difficult to predict when it will ease.

Eurozone headline inflation hit a 1.7% low in September, but has since been re-accelerated with the basic effect from low energy prices diluted. Last week, the European Central Bank said disinflation is “going smoothly.”

“Inflation continues to develop widely in line with staff forecasts and is set to return to the 2% medium-term target of the government council within this year,” the bank added. “Most measures of underlying inflation suggest that inflation will settle around the target continuously.”

On Thursday, the ECB cut interest rates by 25 basis points, bringing the main deposit facility fees to 2.75%. Further rate reductions are expected from the ECB throughout the year.

Capital Economics’ Allen-Reynolds said the latest inflation data “will not change the minds of ECB policymakers about the near-term pathway to interest rates.”

“The fact that services inflation remains high means they prefer to loosen their policies in small steps,” he said.

Inflation is likely to approach the 2% ECB target by summer and could even fall later in the year, Allen Reynolds estimated. He added that there is a unlikely possibility of retaliation from the European Commission and the net impact of the potential tariffs imposed on goods imported from the EU to the US.

ING’s Dutch chief economist, Bert Colijn, has expressed more attention to the impact of such tariffs.

“Retaliation tariffs will again be added to inflation as tariffs usually cause consumer prices,” he said Monday, adding that this means that inflation risks are “far from completely mitigating.” Ta.

“The question is how low the ECB is and how the economy can give more room for breathing, as the risk of inflation remains common and uncertainty,” Colijn said. Masu.

Monday’s data comes after several major eurozone economies last week, including France and Germany. According to preliminary data from the national statistical agency, the annual rate reached 1.8% in France and 2.8% in Germany. The numbers are harmonious across the Eurozone for comparability.