Euro zone inflation dipped last month, data showed today, entering a soft patch that most economists expect will last for at least a year and keep the European Central Bank on hold.
Price growth in the 21 countries that share the euro slipped to its lowest level since September 2024, dropping to 1.7% in January, weighed down by a fall in energy prices. The reading was in line with economists' forecasts.
But a key measure of underlying inflation that strips out volatile items such as energy, food, alcohol and tobacco unexpected edged down to 2.2% from 2.3% in December, as prices in the services sector continued to ease.
Taken together, the readings were unlikely to trigger any immediate move by the ECB, which is expected to keep interest rates unchanged tomorrow and for the remainder of the year.
The euro zone's central bank expects inflation to slightly undershoot its 2% target this year and next before heading back to it in 2028.
Inflation has been hovering around 2% for at least a year after a wave of price hikes fuelled by the economy's recovery from the Covid-19 pandemic and Russia's invasion of Ukraine in 2022, which pushed up fuel costs.
Economists are split over whether the ECB's next move will be a cut or a hike, with some policymakers recently saying both moves are equally likely.
A recent appreciation of the euro against the dollar, partly a response to US President Donald Trump's unpredictable policymaking and worries about the Federal Reserve's independence, has fuelled some market talk about a rate cut.
