The annual inflation rate in the Eurozone increased to 2.5% in January 2025, up from 2.4% in December, according to a preliminary estimate.
This figure slightly surpassed market expectations of 2.4% and marked the highest inflation rate since July 2024.
A key factor behind this rise was the substantial increase in energy costs, which surged to 1.8% in January, compared to just 0.1% in December. This sharp rise in energy prices contributed notably to the overall inflation rate.
The core inflation rate, which excludes volatile food and energy prices, remained unchanged at 2.7% for the fifth month in a row. This figure was slightly above the market forecast of 2.6% but still represented the lowest level since early 2022. The latest inflation data will likely be observed by the European Central Bank (ECB) for future monetary policy decisions.
Source: Eurostat
Global markets remained under pressure as rising bond yields, elevated energy costs, and hawkish Fed expectations strengthened the outlook for higher interest rates.
Global markets remained focused on escalating Middle East tensions as rising oil prices strengthened inflation concerns and expectations for further monetary tightening.
Fed Turns Hawkish (31 August – 4 September)Global markets entered the week with renewed focus on Federal Reserve tightening after Chair Kevin Warsh used his Jackson Hole address to push back against expectations that US inflation pressures were fading. The Dollar Index held near 99.6 after Friday’s sharp advance, while Treasury yields moved higher and precious metals retreated. Markets raised the probability of a September Fed rate hike to 57% from 40% a week earlier as Warsh reiterated the Fed’s commitment to returning inflation to its 2% target.
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