Eurozone inflation near four-year high in January

Eurozone inflation hit a near four-year high in January as energy prices surged, according to a flash estimate released by Eurostat.

Inflation in the 19 countries that share the euro rose to 1.8% from 1.1% in December, above analysts’ expectations for 1.5% and marking the highest inflation rate since February 2013. The European Central Bank’s target is to keep inflation just below 2%.

Energy prices were up 8.1% on the year following a 2.6% rise in December, followed by food, alcohol & tobacco up 1.7% compared with 1.2% in December, and services up 1.2% compared with 1.3% the month before. Non-energy industrial goods grew by 0.5% versus 0.3% in December.

Meanwhile, core inflation – which excludes the prices of energy and unprocessed food – was unchanged at 0.9% year-on-year.

Pantheon Macroeconomics said: “Inflation in the euro area is rising rapidly, and likely will push higher in February. The rise, however, almost exclusively is driven by a leap in the headline components. Energy inflation jumped to 8.1% year-over-year, and will shoot higher next month before easing in March and in the second quarter. Food, alcohol and tobacco inflation, however, also rose to 1.7%, from 1.2% in December lifted by surging inflation in fresh food.

“The stationary core rate was due to a dip in services inflation which offset an increase in non-industrial goods inflation. Overall, we think low core inflation will be enough for the ECB doves to vanquish the hawks in the first quarter, but the March meeting, and updated staff projections, will be very interesting indeed.”