The Eurozone experienced strong inflation in January, with the headline rate rising to 5.1%, the highest since the 1990s. This was driven by a surge in administered energy prices in Italy and rising food prices. The inflation figure prompted a hawkish shift at the ECB meeting, with the ECB expected to agree to some policy tightening in March. GDP growth for Q4 was confirmed at 0.3% q/q, indicating a slowdown in momentum in the eurozone, which is expected to continue in Q1 this year. However, with the health situation improving, a strong rebound is expected from the spring. The main downside risk is the impact of higher inflation on consumer behavior.
