FRANKFURT – Eurozone inflation fell from 9.2 percent in December to 8.5 percent in January, adding to evidence that price pressures have peaked, according to preliminary Eurostat data. Has shown On the eve of the European Central Bank’s next interest rate decision.
That means headline inflation eased for the third straight month after peaking at 10.6 percent in October and has fallen faster than typically expected. A Reuters poll of analysts ahead of release pointed to a 9.0 percent decline.
While certainly welcome news for ECB policy makers battling record inflation levels, the data will be read with a pinch of salt. Technical difficulties at Germany’s statistics office mean that the German component, which accounts for 28 percent of the entire region, is based only on model estimates.
“This situation is creating a lot of uncertainty,” JPMorgan economist Rafael Brune-Aguerre said ahead of the release.
Adding to the complications is that core inflation, an important gauge for underlying inflationary trends, continued to rise. Core inflation excluding energy and processed food rose to 7.0 percent from 6.9 percent. The contraction reading excluding energy, food, alcohol and tobacco was steady at 5.2 per cent in December.
ECB policymakers, due to announce their latest interest rate decision on Thursday, have gone out of their way to stress the importance of underlying price pressures in the current, high-inflation environment.
So the data is unlikely to change the central bank’s policy for the time being.
“Today’s release will not change the big picture,” Frederic Ducrozet, economist at Pictet Wealth Management, said ahead of the release. “Core inflation is very high, and sticky.”
He added: “The ECB looks set to continue raising rates into restrictive territory, like it or not.”