Euro zone inflation drops more than expected but core price growth holds steady
Euro zone inflation eased for the third straight month in January but relief may be limited as underlying price growth held steady and concerns have already been raised about the reliability of the figures.
Inflation in the 20-nation currency bloc fell to 8.5% last month from 9.2% in December data from Eurostat, the European Union’s statistics agency, showed on Wednesday. The figure was well below a Reuters poll expectation for 9%.
Price growth has been in rapid decline since peaking at a record 10.6% in October but the European Central Bank has already promised more rate hikes, fearing that without higher borrowing costs, inflation could get entrenched above its 2% target.
Meeting on Thursday, the bank is all but certain to raise rates by a half a percentage point to 2.5% and the biggest question is just how much more tightening it will signal.
The headline inflation drop is unlikely to expunge concerns among conservative policymakers that rapid price growth is getting entrenched, a worry reinforced by poor underlying inflation data on Wednesday.
Excluding food and fuel prices, inflation picked up to 7% from 6.9% while an even narrower measure watched closely by the ECB, held steady at 5.2%, exceeding forecasts for 5.1%.
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