Eurozone Inflation Declines Less Than Expected in January, Warns Pantheon Macroeconomics

Recent analysis from Pantheon Macroeconomics economists Claus Vistesen and Ankita Amajuri reveals that eurozone inflation’s slowdown in January is materializing less than expected, signaling potential headwinds for European policymakers. The revised outlook underscores how persistent inflationary pressures in key economic sectors are proving more stubborn than previously anticipated, delaying the disinflationary momentum markets had been counting on.

Revised Forecast Shows Steeper Inflation Trajectory

Pantheon Macroeconomics has raised its January inflation forecast to 1.8%, up significantly from an earlier estimate of 1.6%. According to Jin10’s report of the analysis, this revision reflects recent price data from major eurozone economies, particularly Germany and Spain, which revealed stronger price pressures than models had predicted. Meanwhile, robust fourth-quarter GDP growth and a stable unemployment rate are reinforcing the expectation that the European Central Bank may maintain its cautious approach to rate cuts, keeping monetary policy tighter for less time than previously signaled.

Germany’s Mixed Inflation Picture: Energy Eases, Services Persist

While German energy prices—both electricity and gas—have cooled as expected, a notable rebound has emerged in food and core goods inflation. More critically, the services sector continues to demonstrate resilient price growth that has effectively neutralized the benefits of lower energy costs. This dynamic illustrates why overall disinflationary trends are advancing less than headline figures might suggest, as service-driven inflation proves remarkably persistent across the eurozone.

Spain’s Stable Core Inflation Defies Headline Softness

Spain presents a similar pattern: headline inflation has declined somewhat due to statistical base effects from a year ago, yet the core inflation rate—which excludes volatile energy and food items—has held firm. This divergence underscores that while headline measures show improvement, underlying price pressures remain less responsive to policy stimulus than historically typical. The resilience in core rates across both economies indicates that stubborn service-sector inflation is the primary driver preventing a more pronounced disinflation.