Eurozone inflation confirmed at 1.8% for January

Inflation in the eurozone rose 1.8% in January compared to a 1.1% jump the month before and close to the European Central Bank’s target of just below 2%, data from Eurostat confirmed on Wednesday.

Consumer prices in the 19 countries that share the euro were down 0.8% on a monthly basis, also in line with market expectations.

Core inflation, which excludes unprocessed food and energy prices, was unchanged from December at 0.9%.

Energy prices were up 8.1% compared to a 2.6% increase in December 2016, while services prices were 1.2% higher compared to a 1.3% increase last month.

Food, alcohol and tobacco prices rose 1.8% from 1.2% in December, while non-energy industrial goods prices were up 0.5% compared to 0.3%.

Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, said: “The headline was boosted by surging energy and food inflation. Base effects from last year’s crash in oil prices and a supply shock in unprocessed food inflation are the key stories here. Headline inflation pressures likely will rise further in February, but will ease in March and in Q2.

“We think that core inflation will increase this year, but the ECB will continue to emphasise that monetary stimulus is still needed when it convenes in March. That said, we are now very interested to see the updated staff projections. It is dangerous to assume, we think, that they won’t include an upward revision in short-term inflation expectations, which could spook markets. “