According to the latest figures from the European Union’s statistics agency, the annual headline inflation in the Euro zone slightly decreased to 2.8% in January, meeting the forecast of economists. This comes after a level of 2.9% in December and 2.4% in November, largely due to the reduction of energy price supports.
The core inflation rate also saw a slight decrease to 3.3% in January from 3.4% in December, which was slightly higher than the anticipated 3.2%. The services inflation, which is closely monitored for its impact on domestic wage pressures, remained steady at 4%. Meanwhile, disinflationary effects from the energy market continued to lessen.
The preliminary figures for Germany also showed a slight easing of inflation to 3.1%, marking it as one of the main contributors to the bloc’s sluggish economic growth. The European Central Bank is closely monitoring various data to determine the timing of potentially lowering interest rates from their current record highs. Despite the peak of 10.6% inflation in October 2022, the central bank’s 2% target is now within reach.
Even though the market is pricing in cuts from April, some policymakers are suggesting that the declines are more likely to take place in the summer or later. The ECB emphasizes that any decision remains dependent on the data. During the recent monetary policy meeting, ECB President Christine Lagarde acknowledged the ongoing disinflation process, despite the slight increase in December.
