Eurozone flash inflation for January is expected to be slightly higher than December’s revised reading of 1.9%. Core inflation is forecasted to remain at 2.3% year over year. The European Central Bank is likely to keep rates unchanged at its first meeting of 2026 on Feb. 5. Inflation is expected to fall to 1.7% in January, with core inflation remaining at 2.3%.

The strong euro is putting downward pressure on prices in the eurozone, causing concern at the European Central Bank. The recent appreciation of the euro is expected to lower the ECB’s inflation forecasts, potentially leading to a rate cut in March. ECB staff updated their economic forecasts, with inflation expected to average 2.1% in 2025 and 1.9% in 2026.

Despite concerns over the strong euro’s impact on inflation, no rate cut is expected at the ECB’s meeting on Feb. 5. Markets anticipate stable rates throughout 2026. The ECB began easing interest rates in June 2024 and has delivered eight rate cuts, lowering the deposit rate to 2.00%. The next ECB meetings in 2026 are scheduled for March 19, April 30, June 11, July 23, Sept. 10, Oct. 29, and Dec. 17.

Read more at Morningstar: Eurozone Inflation: What to Expect from January’s CPI Data