From Morningstar:

Eurozone inflation fell to 2.8% in January, down from 2.9% in December, putting pressure on the European Central Bank to cut interest rates. Core inflation, which excludes energy and food costs, also fell to 3.3% but missed expectations. The greatest contributors to inflation were food, alcohol, and tobacco, according to Eurostat.

Michael Field, European market strategist at Morningstar, says that the fall in inflation is a welcome sign, and that the core inflation is moving “in the right direction.” He says that with record high interest rates, inflation has fallen in 12 of the last 13 months, and the ECB’s inflation target of 2% is within sight.

Nicola Mai, economist at Pimco, expects that the current shipping turmoil in the Red Sea will not have a major impact on European inflation. He says that global goods demand is not as strong as it was during the pandemic, and there are alternative supply routes available to companies.

With falling inflation, pressure for interest rate cuts is increasing, and fears of economic overheating are easing. Data shows steady unemployment rates within the Eurozone, signaling to the ECB that there is room for interest rates to fall in the coming months.



Read more: Eurozone Inflation Falls, Rate Cuts Edge Closer