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Eurozone inflation topped forecasts in January

Rising food costs cast doubt on prospect of near-term cut in Euro area interest rates.

01 February 2024

Following the Federal Reserve’s tacit admission that a March cut in interest rates - one that markets had expected - was unlikely, an inflation print from the Eurozone has put an equal wobble on the probability of an early rate cut from the European Central Bank (ECB).

January’s flash Consumer Price Index (CPI) estimate of 2.8% was ahead of the expected 2.7% (compared to 2.9% the previous month). Core CPI at 3.3% was similarly ahead of forecasts of 3.2%. While energy costs had fallen by 6.3% year-on-year, this was all offset by broad gains across all other inflation inputs, with food items showing the biggest increase at 5.7%. The last mile to the 2% inflation target was always going to be the most difficult road to travel and with a stagnating Eurozone economy, the ECB’s job is far from an easy one.

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Charles Hepworth

Investment Director
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