Inflation in the Euro-area has decreased to 1.7% y/y in January, while core inflation remains stable at 2.2%. ECB is expected to maintain its current policy stance due to the calm inflation outlook, despite some uncertainty from volatile energy prices. Nordea’s report, authored by Tuuli Koivu and Anders Svendsen, suggests inflation will stay below 2% for most of 2026, with potential rate hikes not anticipated until the second half of 2027.
Inflation trends and ECB policy outlook
“Inflation declined more clearly below the target to 1.7% y/y in January. However, core inflation slowed only slightly to 2.2%, and broad price pressures are still anchored around the ECB’s target, allowing the central bank to continue standing still.”
“We expect inflation to stay below 2% for most of 2026 and to return to the ECB’s target permanently only in the latter part of the year but there is certainly a lot of uncertainty related to the exact profile of the headline inflation given e.g. the recently volatile food and energy prices.”
“This profile, however, together with robust core inflation numbers and the expected gradual acceleration in GDP growth, implies that the ECB is in no hurry to change policy rates in either direction.”
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
Source: https://www.fxstreet.com/news/ecb-can-continue-to-stand-still-nordea-202602041401
