Eurozone Inflation Cools to 1.7%: Hits Target Estimates as Price Pressures Ease

Market snapshot: The Eurozone consumer price inflation (CPI) for January 2026 has officially slowed to 1.7% year-on-year, aligning perfectly with market expectations. This marks a notable deceleration from the 1.9% recorded in December 2025. The data released by Eurostat comes amidst significant methodological changes to the HICP basket, including the addition of 'games of chance' and a shift in the reference index to 2025=100.

Summary: Eurozone inflation matched estimates at 1.7% in January, falling further below the ECB's 2% target. While headline inflation is cooling, core CPI remains sticky at 2.3%, complicating the European Central Bank's upcoming interest rate decisions.

Key Takeaways

• Headline inflation met the 1.7% consensus, down 20 bps from the previous month.
• Core inflation remains persistent at 2.3%, suggesting underlying price pressures in the services sector.
• Methodological updates by Eurostat, including the reweighting of the HICP basket, were implemented this month.
• The readings reinforce expectations that the ECB may maintain current interest rates in its February meeting.

SAHI Perspective

For Indian markets, the cooling Eurozone inflation is a double-edged sword. While it suggests a stabilization of the European economy—a key destination for Indian engineering and IT exports—the stickiness of core inflation means the ECB won't pivot to rate cuts immediately. However, the recent signing of the India-EU Free Trade Agreement (FTA) creates a structural tailwind that may outweigh short-term macro volatility.

Closing Insight

As inflation moves below the 2% mark, the narrative shifts from 'fighting prices' to 'supporting growth.' Traders should watch for the ECB's policy signals on Thursday for clues on the next leg of the Euro's trajectory.

High Performance Trading with SAHI.