Eurozone Inflation Rises Modestly In January

(RTTNews) - Eurozone inflation edged up in January due to the acceleration in energy price growth but the intended easing path of the European Central Bank is unlikely to be influenced by the modest increase. Inflation in the euro area increased to 2.5 percent in January, while it was expected to remain at December's rate of 2.4 percent, flash data from Eurostat revealed Monday.

Core inflation that strips out prices of energy, food, alcohol and tobacco, held steady at 2.7 percent in January.

The acceleration in overall inflation was driven by the jump in energy prices to 1.8 percent compared to a marginal 0.1 percent rise in December.

The increase in food, alcohol and tobacco prices softened to 2.3 percent from 2.6 percent. Non-energy industrial goods prices registered a stable growth of 0.5 percent and services inflation slowed to 3.9 percent from 4.0 percent a month ago.

Capital Economics economist Jack Allen-Reynolds said core inflation is likely to fall to within touching distance of 2 percent by the summer and the risks are skewed towards it dropping below that threshold in the second half of the year.

The ECB sees a sluggish economy and seems quite convinced that inflation is now under control, ING economist Bert Colijn said.

However, with inflationary risks still prevalent and uncertainty increasing, the question is how low the ECB can push rates to give the economy more breathing room, said Colijn.

Last week, the ECB had cut its interest rates for a fourth policy session in a row as the currency bloc ground to a halt in the final quarter of 2024 and inflationary pressures increased. The rates were lowered by 25 basis points.