Inflation in the euro area climbed to 2.5% in January, up from 2.4% in December, marking the highest level since July. The increase aligns with economists’ expectations, reinforcing concerns about persistent price pressures as the new year begins.
By The Numbers. Similar to trends observed in the United States, the primary driver of inflation in the euro area was the services sector, contributing 1.77 percentage points (pp) to the annual rate. Rising costs in hospitality, transportation, and personal services underpinned this surge.
- Food, alcohol, and tobacco followed, adding 0.45 pp to the overall rate. Energy prices, while less volatile than in previous years, still contributed 0.18 pp, while non-energy industrial goods accounted for 0.12 pp.
Breaking It Down. Inflation rates varied significantly across the euro area. Denmark registered the lowest annual rate at 1.4%, followed by Ireland, Italy, and Finland, all at 1.7%.
- On the flip side, Hungary led with an annual rate of 5.7%, trailed by Romania (5.3%) and Croatia (5.0%).
Bottom Line: Rising inflation remains a global concern, with the euro area facing similar pressures as the United States, complicating the outlook for monetary policy in 2025.
