Inflation in the 20 countries that use the euro eased in the first month of 2024, returning to a downward trend and fueling hopes that prices in the eurozone were returning to the 2 percent target set by the European Central Bank.

Consumer prices in the eurozone rose 2.8 percent year-on-year in January, up from 2.9 percent in December, the European Union’s statistics agency reported Thursday.

Economists had expected to see a slightly larger drop, actually a correction after the expiration of some government subsidies boosted inflation in December.

Investors are watching for signs that the European Central Bank will lower interest rates, which authorities held at a record 4 percent last week. Christine Lagarde, president of the central bank, has hinted that a rate cut could happen by mid-year, but authorities would be analyzing data to inform their decisions.

The numbers released Thursday could raise expectations that rates will fall sooner rather than later. Core inflation, the inflation rate that excludes volatile food and energy prices, continued its downward trend, cooling to 3.3 percent in January from 3.4 percent in December. That figure is crucial for the ECB as it reflects underlying price trends across the eurozone.

The European statistics agency reported Tuesday that the eurozone economy stagnated in the fourth quarter of last year, hampered by a persistent energy crisis and a decline in manufacturing in Germany, Europe’s largest economy.

“While today’s figure still shows easing price pressures, it is too early to give a thumbs up to inflation,” ING’s Peter Vanden Houte wrote in a research note. The ECB will remain cautious, he said, “and will not contemplate any rate cuts before June.”