Brussels, Feb 2 (IANS): Annual inflation in the eurozone is projected to fall to 8.5 per cent in January from 9.2 per cent in December 2022, according to a flash estimate published on Wednesday by Eurostat, the EU statistical bureau.

Inflation in the eurozone peaked at 10.6 per cent last October and has been slowly decreasing since then, Xinhua news agency reported.

Energy prices remain the main driver of the eurozone's annual inflation rate, with a 17.2 per cent increase compared to January 2022 (25.5 per cent in December 2022), followed by prices of food, alcohol and tobacco with a year-on-year increase of 14.1 per cent in January (13.8 per cent in December 2022).

"The drop from 9.2 to 8.5 per cent is faster than expected," Bert Colijn, senior economist for the eurozone at ING, said. Food inflation remains stable at 14.1 per cent, but energy drives the rate down at the start of the year. The drop from 25.5 to 17.2 per cent reflects lower market prices and significant negative base effects, he added.

The year-on-year increase in energy prices peaked last October at 41.5 per cent. Since then, energy prices have been decreasing.

Price ceilings for energy had an effect, according to Colijn, who expects energy prices to decline further.

"In recent days, both the Brent oil price in euros and natural gas market prices have declined year-on-year, which will put more downward pressure on consumer prices in the coming months."

The Baltic countries projected the highest inflation rates for January: 21.6 per cent for Latvia, 18.8 per cent for Estonia, and 18.4 per cent for Lithuania.

The countries with the lowest annual inflation rate include Spain and Luxembourg, both with 5.8 per cent, as well as France with 7 per cent.

However, data for Germany for January 2023 were not available in time for publication by Eurostat due to technical data processing issues, Colijn noted.