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Expectations that inflation across the 20 countries using the euro will ease in the first months of 2024, returning to a downward trend and that prices in the euro area are returning to the 2% target set by the European Central Bank. has increased.
Consumer prices in the euro zone rose 2.8% year-on-year in January, slowing from a 2.9% rise in December, the European Union's statistics office said on Thursday.
Economists had expected a bigger drop, a real adjustment after inflation rose in December as some government subsidies expired.
Why it matters: Data will determine when to cut rates
Investors are watching for signs that the European Central Bank will cut interest rates, but policymakers last week left them unchanged at a record 4%. Central bank President Christine Lagarde has indicated that a rate cut could occur around mid-year, but policymakers will be looking at data to inform their decisions.
The figures released on Thursday may raise hopes that interest rates will be cut sooner rather than later. The core inflation rate, which excludes volatile food and energy prices, continues to trend downward, dropping to 3.3% in January from 3.4% in December. This figure is extremely important for the ECB because it reflects the fundamental trend in prices across the euro area.
The Eurozone economy stagnated in the fourth quarter of last year due to a prolonged energy crisis and a manufacturing downturn in Germany, Europe's largest economy, the European Statistics Office reported on Tuesday.
Quote: “It's too early to reveal everything.”
“While today's numbers still point to easing price pressures, it is too early to tell the full story about inflation,” ING's Peter Vanden Hout said in a research note. He said the ECB remains cautious and “will not consider cutting interest rates until June.”
