The news
Inflation in the 20 countries using the euro eased in the first month of 2024, returning to a downward trend and fueling hopes that prices in the euro zone are about to return to normal. The 2% target set by the European Central Bank.
Consumer prices in the euro zone rose 2.8 percent in January from a year earlier, compared with 2.9 percent in December, the European Union statistics agency reported on Thursday.
Economists had expected a slightly larger decline, in reality a correction after the end of some government subsidies that caused inflation to rise in December.
Why it matters: Timing of interest rate cuts depends on data
Investors are watching for signs that the European Central Bank will cut interest rates, which policymakers last week kept at a record low of 4 percent. Christine Lagarde, the central bank president, suggested a rate cut could happen around mid-year, but that policymakers would look at the data to inform their decisions.
The figures released Thursday could raise hopes of a rate cut sooner rather than later. Core inflation, the inflation rate that excludes volatility in food and energy prices, continued its downward trend, falling to 3.3 percent in January from 3.4 percent in December. This figure is crucial for the ECB, as it reflects underlying price trends in the eurozone.
The European Statistics Agency reported on Tuesday that the euro zone economy stagnated in the fourth quarter of last year, held back by a lingering energy crisis and a slowdown in manufacturing in Germany, Europe’s largest economy. ‘Europe.
Quotable: “Too early to give the green light”
“Even though today’s figures show further easing of price pressures, it is far too early to give the green light on inflation,” writes Peter Vanden Houte of ING in a research note. The ECB will remain cautious, he said, “and will not consider any rate cuts before June.”
