Eurozone inflation eased to its lowest level since the launch of euro ten years ago, official data showed Friday. Deteriorating economic sentiment and rising unemployment amid recession add pressure on the European Central Bank to cut interest rates again.
A flash estimate released by the Eurostat showed that annual inflation eased to 1.1% in January from 1.6% in December. Annual inflation stood below the expected rate of 1.4% and the central bank's target rate of below, but close to 2% over the medium term.
The Luxembourg-based statistical office is slated to issue final numbers on February 27.
Commenting on the flash estimate, Christoph Weil, an analyst at Commerzbank said falling inflation gives the ECB greater scope to act. Economist expects rate cuts of another 100 basis points over the coming months, taking the key rate to 1%.
In January, inflation slowed on falling energy prices. Lower inflation would raise purchasing power for private households, encouraging demand. Though the inflation rate could turn negative for a short period this summer, economist sees no threat of actual deflation.
Prices for goods and services outside the energy sector are continuing to rise as seen in the last year. Further, the main determinant of inflation, wages are also likely to increase substantially this year, analyst said.
In its first Governing Council meeting of the year, the ECB had trimmed its key interest rate by 50 basis points to 2% to shore up the economy from deepening recession. This took the rate to the level last seen in June 2003.
Earlier in the month, ECB President Jean-Claude Trichet stated that presently there is no threat of deflation in Eurozone and risks to price stability over the medium term are broadly balanced. Trichet said the Eurozone is witnessing a process of disinflation, mainly as a result of a sharp fall in oil and commodity prices. To that extent, it is a welcome development.
Separately, the Eurostat said the jobless rate rose to 8% in December from an upwardly revised 7.9% in November. The statistical office revised the rate for November from 7.8%. Economists had expected a rate of 7.9% for the month of December.
Compared with November 2008, the number of unemployed people increased 230,000 in the Euro area.
Among the Member States, the lowest unemployment rates were recorded in the Netherlands and Austria, while the highest rate was reported in Spain.
The EU27 unemployment rate was 7.4% in December, compared with 7.3% in November. A year ago, the jobless rate was 6.8%. The number of persons unemployed in December increased 309,000 from the prior month.
For comments and feedback contact: editorial@rttnews.com
June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.