(Feb 4): Euro-area inflation sank further below the European Central Bank’s 2% target as officials weigh their next steps on interest rates.
Consumer prices rose 1.7% from a year ago in January — a slowdown from the previous month and in line with the median estimate in a Bloomberg survey. The reading is the weakest since September 2024.
Core inflation, excluding volatile food and energy costs, unexpectedly eased to 2.2%, while the closely watched services gauge slowed to 3.2%, Eurostat said Wednesday.
The data arrive in the midst of the ECB’s first interest rate-setting meeting of 2026, with analysts expecting borrowing costs to be left at 2% for a fifth straight time on Thursday.
After falling short this year and next, inflation is projected to return to the ECB’s goal and policymakers generally consider themselves well placed. A minority, however, still frets about a more durable undershoot. The euro’s recent rally could heighten such fears.
At the same time, some officials still worry about stubbornly high price gains in the services sector. President Christine Lagarde has warned that any moderation could be delayed by a slower retreat in wage pressures.
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Across the bloc’s 21 member states, the picture is mixed. While German inflation of 2.1%, just exceeded expectations, France unexpectedly recorded a five-year low of 0.4%.
One factor that could pull prices up is faster economic expansion. But while the region grew 0.3% in the final quarter of 2025 — a bit quicker than anticipated — Donald Trump’s recent tariff threats over Greenland highlight that risks remain.
In light of such lingering uncertainty, ECB policymakers called for total flexibility on rates at their December meeting.
Uploaded by Magessan Varatharaja
