Inflation is slowing in the euro zone: it fell to 8.5% in January, with underlying inflation soaring.

Thus, the impact of energy, fresh food, alcohol and tobacco is excluded from the calculation, the underlying inflation rate remains at the historic level of 5.2%.. If we exclude only the impact of energy, the rate is higher by a tenth of a percentage point than in December and stands at 7.3%.

As for the general CPI, moderated for the third consecutive monthto its lowest level since May 2022.

By component, energy represents the highest annual rate in January (17.2%, against 25.5% in December), followed by food products, alcohol and tobacco (14.1%, against 13.8% in December), non-energy industrial goods (6.9 %, against 6.4% in December) and services (4.2%, against 4.4% in December).

By country, Spain and Luxembourg recorded the lowest inflation rates (5.8%), followed by Malta (6.7%) and Cyprus (6.8%). On the other hand, the highest price increases are observed in Latvia (21.6%), Estonia (18.8%) and Lithuania (18.4%). As many as seven eurozone economies are posting double-digit inflation rates..

Eurostat points out that preliminary January data did not include figures for Germany “due to technical issues in data processing”, meaning that “information for January 2023 was not available in time for publication. in Germany “. It is important to keep this in mind, as Germany is the largest and most important economy in the region.

“We believe the data confirms that headline inflation peaked in the fourth quarter of last year and the growth rate of the consumer price index has picked up. will continue to decline throughout 2023 due to favorable base effects and lower gas and energy prices. In addition, government interventions aimed at protecting households against rising energy bills will also contribute to disinflation,” say analysts at Oxford Economics.

However, they believe that “the focus of the European Central Bank (ECB) is gradually shifting from the headline measure to core inflation, Declines in headline inflation will do little to dampen the central bank’s harsh rhetoric.at least in the short term. They therefore estimate that the ECB will raise interest rates by 50 basis points this month and next, “with the risk of a further hike of 25 basis points in May if inflationary pressures do not subside. as we expect”.

For the DWS economists, “the slowdown in inflation in the euro zone is a good sign. But this change is mainly due to lower energy prices. Food prices continued to rise, reinforcing the feeling, especially among consumers, that everything is becoming more expensive.. Furthermore, while the underlying rate remained unchanged, the prices of durable consumer goods continued to rise.

In this context, they expect an increase in official interest rates of 50 basis points at the ECB meeting on Thursday, “with a clear prospect of further increases”. In the opinion of Nomura’s experts, “there is a significant risk of further rate hikes. and that the underlying prices will continue to rise in February and March”.