Eurozone Inflation Hits 16-month Low

Eurozone Inflation Hits 16-month Low

Wednesday 4th February  2026 – 12:27 (GMT)

Euro area inflation fell further at the start of 2026, underscoring a continued easing in price pressures across the bloc. Annual inflation slowed to 1.7% in January from 2% in December, matching market expectations and marking the lowest reading since September 2024. The decline coincided with a sharp appreciation of the euro, which rose above $1.20 versus the dollar to reach a four-year high by the end of the month.

Lower energy and services prices were the main drivers of the slowdown. Energy prices fell 4.1% year-on-year, compared with a 1.9% decline in December, while services inflation eased to a four-month low of 3.%. Core inflation, excluding energy, food, alcohol and tobacco, slipped to 2.2% – its lowest level since October 2021.

Some pockets of inflationary pressure remained. Inflation in unprocessed food accelerated to 4.4% from 3.5%, while non-energy industrial goods edged up to 0.4%. Price growth for processed food, alcohol and tobacco was unchanged at 2.1%, suggesting lingering cost pressures in selected categories.

National data showed a mixed picture among the eurozone’s largest economies, with inflation easing in France, Spain and Italy but rising slightly in Germany. For the European Central Bank, the figures will reinforce confidence that inflation is moving closer to target, though uneven dynamics persist. The combination of softer core inflation and a stronger euro is likely to support expectations of further policy easing later this year, provided domestic price pressures continue to cool.