Overview
- Eurostat’s flash estimate shows headline inflation at 1.7% in January with core easing to 2.2%, the lowest headline pace since September 2024.
- Economists expect the European Central Bank to leave rates unchanged on Thursday and signal no imminent policy shift.
- A stronger euro has raised concerns of an inflation undershoot, while recent oil moves could blunt the disinflationary impact of currency gains.
- Analyst views diverge on the next step, with Deutsche Bank projecting the next move as a hike in mid‑2027 as others pencil the possibility of late‑2026 cuts.
- Lower energy costs drove much of the drop in headline inflation as services pressures continue to ease and domestic demand stays resilient.