Euro zone inflation surged to 2.5% in January on an annual basis, exceeding economists' expectations, which had forecast a steady 2.4% rate from December. This unexpected uptick comes amid the European Central Bank's (ECB) recent assertion that disinflation is progressing as planned. January's inflation marks a notable rise from the September low of 1.7%, driven in part by diminishing base effects from previously lower energy prices.
Energy costs significantly contributed to the inflation increase, with a 1.8% rise from the previous year. Meanwhile, core inflation, excluding volatile items like food and energy, remained stable at 2.7% since September. Despite the overall increase, services inflation saw a minor decline, dropping to 3.9% in January from the December figure of 4%.
In France, preliminary data showed an annual inflation rate of 1.8%, whereas Germany reported a higher rate of 2.8%. These figures align with recent consumer price index data released by major euro zone economies, highlighting regional disparities within the bloc.
Reacting to these developments, the ECB announced a cut in interest rates by 25 basis points last Thursday, lowering the key deposit facility rate to 2.75%. The central bank signaled further rate reductions might follow throughout the year to support economic stability and counteract rising inflationary pressures.