Euro Area Inflation Drops to 1.7% in January

Euro area and E.U annual inflation fell to 1.7% and 2.0% in January 2026, down from 2.0% and 2.3% respectively in December and well below the 2.5% and 2.8% recorded a year earlier according to Eurostat. The Euro area held steady at 2.0% through much of late 2025. The biggest contributor to the decline was energy, which fell 4.0% annually, dragging overall inflation lower. Services remained the largest upward driver, contributing 1.45 percentage points, followed by food, alcohol, and tobacco at 0.51 pp. France recorded the lowest inflation rate among EU members at just 0.4%, while Romania led at 8.5%. Annual inflation fell in 23 member states, remained stable in one, and rose in three. Bulgaria joined the euro area on January 1, 2026, expanding it to 21 members.