Euro Area: Harmonized inflation ticks up in January
Latest reading: Harmonized inflation came in at 2.5% in January, up from December’s 2.4%. January’s result was the highest inflation rate since July 2024 and surprised markets to the upside. The result was solely driven by a sharper increase in energy prices. That said, prices for food and services rose at slower rates.
The trend pointed down slightly, with annual average harmonized inflation coming in at 2.3% in January (December: 2.4%). Meanwhile, core inflation was steady, coming in at December’s 2.7% in January.
Lastly, harmonized consumer prices fell 0.28% in January over the previous month, contrasting December’s 0.36% rise.
Outlook: Our panel expects inflation to cool in the coming months and to hover around the ECB 2.0% target from Q2 onwards.
Panelist insight: ING’s Bert Colijn commented:
“Now that the US is moving closer to introducing tariffs on the EU, the question is what the European Commission’s response will be. Retaliatory tariffs would add to inflation again as tariffs usually result in higher consumer prices. So clearly, inflationary risks have far from fully abated. The European Central Bank sees a sluggish economy and seems quite convinced that inflation is now under control. But with inflationary risks still prevalent and uncertainty increasing, the question is how low the ECB can push rates to give the economy more breathing room.”