Eurozone inflation fell in January to its lowest level since September 2024, supported by falling energy prices, marking a period of slowdown that is expected to constrain any monetary policy changes by the ECB.
Headline inflation in the 21 eurozone countries came in at 1.7%, in line with market expectations, while core inflation unexpectedly eased to 2.2%, reflecting continued moderation in the services sector.
The combination of readings reinforced expectations that the ECB will keep interest rates unchanged at its next meeting and for the rest of the year, with inflation still to return fully to target.
While the ECB expects inflation to be just below its 2% target over the next two years, uncertainty remains over its next steps, with policymakers torn between cutting and hiking rates.
The recent strengthening of the euro as well as concerns over US economic policy and the Fed's independence have sparked speculation that the ECB may reconsider its cautious stance if price pressures continue to subside.
