Michael Mann 
The euro zone inflation accelerated to a hotter-than-expected 2.5% in January on an annual basis, flash data from statistics agency Eurostat showed Monday.
Economists polled by Reuters had expected the January inflation print to come in at 2.4%, unchanged from December.
So-called core inflation, which strips out food, energy, alcohol and tobacco prices, came in at 2.7% in January and has remained unchanged since September. The closely watched services inflation print meanwhile inched lower to 3.9% in January from 4% in December.
Energy costs however jumped, rising 1.8% from a year earlier. This was up sharply from December’s 0.1% increase.
Headline inflation in the euro zone hit a low of 1.7% in September, but has since re-accelerated as base effects from lower energy prices have faded. The European Central Bank last week said disinflation “is well on track.”
“Inflation has continued to develop broadly in line with the staff projections and is set to return to the Governing Council’s 2% medium-term target in the course of this year,” the bank added. “Most measures of underlying inflation suggest that inflation will settle at around the target on a sustained basis.”
The ECB on Thursday cut interest rates by 25 basis points, bringing the key deposit facility rate to 2.75%. Further rate reductions are expected from the ECB throughout the year.
The Monday data comes after several key euro zone economies, including France and Germany, last week reported their latest consumer price index data. The annual rate hit 1.8% in France and 2.8% in Germany, according to preliminary data from the country’s statistics agencies. The figures are harmonized across the euro zone for comparability.
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