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Eurozone inflation surged to 2.5% in January, marking the highest rate since July and remaining above the European Central Bank’s medium-term target of 2% for the third consecutive month.

Eurostat’s final reading on Monday confirmed that consumer prices in the region rose 2.5% year-on-year, exceeding analysts' expectations and up from 2.4% in December. This marks the fourth consecutive increase in annual inflation since it hit a three-year low of 1.7% in September 2024.

Among the 27 EU member states, inflation showed varying trends. Compared to December, eight countries saw a drop in annual inflation, five remained stable, and 14 experienced a rise, Eurostat reported.

The main drivers of inflation in the euro area were services, contributing 1.77 percentage points, followed by food, alcohol, and tobacco (0.45 p.p.), energy (0.18 p.p.), and non-energy industrial goods (0.12 p.p.). Notably, Hungary recorded the highest inflation rate in the region at 5.7%, while Denmark posted the lowest at 1.4%.

Core inflation, which excludes volatile items like food, energy, alcohol, and tobacco, remained unchanged at 2.7% for the fifth consecutive month. Meanwhile, inflation in the broader European Union stood at 2.8% in January.

The figures confirm an early February estimate, when analysts estimated the increase was not expected to alter policymakers’ plan to continue lowering interest rates.

“January’s inflation data won’t change ECB policymakers’ minds about the likely near-term path for interest rates,” Jack Allen-Reynolds, economist at the consultancy Capital Economics, said at the time. “The fact that services inflation remained high will mean they will prefer to loosen policy in small steps.”