By Ed Frankl
In January, inflation in the eurozone experienced a slight decrease, although it was not as much as expected. This may disappoint those who were hoping that the European Central Bank (ECB) would begin reducing interest rates in the near future.
According to preliminary data released by the European Union's statistics agency Eurostat on Thursday, the bloc's consumer price index, which measures the cost of goods and services, increased by 2.8% compared to the previous year. This is a slight drop from the 2.9% growth recorded in December. The figure is slightly higher than the anticipated 2.7% growth predicted by economists in a poll conducted by The Wall Street Journal.
Meanwhile, core inflation, which excludes volatile energy, food, alcohol, and tobacco prices and reflects underlying inflationary trends, only decreased marginally to 3.3% in January from 3.4% in December. This reading slightly exceeded the consensus of 3.2%.
The gradually cooling inflation has given rise to expectations that the ECB may consider reducing interest rates; however, January's higher-than-expected inflation rate, which remains significantly above the ECB's target of 2%, combined with persistent wage growth in the eurozone, may dampen these expectations.
Before the release of the inflation data, money markets had priced in an initial rate cut for April. However, ECB President Christine Lagarde stated during a press conference following the recent monetary policy meeting that it was premature for policymakers to discuss rate cuts.
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