Eurozone Inflation Projection for January: How GDP Data Affects Analysts' Forecasts

According to the latest analysis from Pantheon Macroeconomics obtained through Jin10, inflation expectations for the eurozone in January have been significantly revised. Analysts Claus Vistesen and Ankita Amajuri highlight that recent economic dynamics have altered their outlook, particularly based on key economic indicators including GDP performance and labor market conditions in the euro area.

Revised Inflation Forecasts and the Impact of Economic Data

Pantheon Macroeconomics has revised the eurozone inflation projection for January to 1.8%, up from the previous estimate of 1.6%. This adjustment does not stem from a void but results from stronger-than-anticipated economic signals. Robust GDP growth in the last quarter of 2025 and stable unemployment rates in the eurozone indicate the economy remains resilient. The direct impact of this is a potential delay in interest rate cuts by the central bank.

Solid GDP data reflect sustained domestic demand, which in turn could put upward pressure on prices, especially in certain sectors sensitive to employment conditions.

Analysis of Inflationary Pressures in Germany and Fourth Quarter GDP Factors

The situation in Germany shows complex inflation dynamics. Although electricity and gas prices have fallen significantly, data reports detect a sharp rebound in inflation in the food and core goods categories. This phenomenon is often associated with a consistent demand recovery, indicating that GDP growth exerts a demand-pull effect on food commodity prices.

Furthermore, inflationary pressures from the services sector remain persistent in Germany, offsetting gains from energy cost reductions. The service sector is generally sensitive to labor market dynamics and broader economic growth.

Inflation Trends in Spain and the Unemployment Rate Influence

In Spain, overall inflation shows a downward trend supported by statistical base effects. However, a more important metric to watch is core inflation—an indicator that excludes volatile components and provides a more accurate picture of fundamental price pressures.

Spain’s core inflation remains stable at a higher-than-expected level, reflecting that aggregate demand is still strong. The moderate unemployment rate in Spain contributes to persistent wage pressures, ultimately affecting prices of services and core goods.

Why GDP and Core Inflation Determine Interest Rate Policies

Economic signals from these two largest eurozone countries send a clear message: sustained GDP growth and stable unemployment create a macroeconomic environment that does not fully support interest rate reductions in the near term. These analysts’ views are based on the understanding that core inflation—not just headline inflation—remains the primary focus of eurozone monetary authorities in their interest rate policy formulation.