Portugal’s Inflation Falls to 1.9%, Easing Food, Energy and Mortgage Costs

Portugal’s National Statistics Institute (INE) has calculated that consumer prices rose just 1.9 % year-on-year in January, a slowdown that immediately eases pressure on wages, mortgages and the next round of interest-rate decisions.

Why This Matters

• Lower grocery inflation – price growth on basic food items cooled to 5.8 %, helping stretch monthly shopping budgets.

• Energy still cheaper – household power and fuel bills fell another 2.2 %, cushioning winter costs.

• Core inflation now 1.8 % – with volatile items stripped out, underlying pressure is the weakest in 20 months.

• Euro-area context – Portugal sits slightly above the bloc’s 1.7 %, but the gap is narrowing and could influence European Central Bank timing on rate cuts.

A Softer Price Landscape

After peaking above 10 % during the 2022 energy shock, Portugal’s inflation rate has been on a steady descent. January’s 1.9 % print is 0.3 points below December and marks the first time since mid-2024 that the headline figure sits comfortably within the European Central Bank’s 2 % “price-stability” zone. The retreat stems from three pillars:

Food price fatigue – Unprocessed items such as fresh fruit and vegetables slowed to 5.8 %, while processed foods eased to 0.8 %.

Persistent energy deflation – Electricity, gas and petrol collectively posted -2.2 %, extending a six-month negative streak.

Services losing steam – Hotel and restaurant inflation slipped below 3 %, reflecting off-season tourism and softer wage push.

INE will publish the final detailed basket on 11 February, but few economists expect major revisions.

How Portugal Compares to the Euro Area

Eurostat’s flash estimate shows the currency union at 1.7 %. Portugal’s slightly higher rate owes chiefly to food prices, which remain 0.9 points above the euro-area average. Still, the convergence is striking: in late 2023 the gap exceeded 1.5 points. The alignment matters because the Bank of Portugal must implement ECB policy. If Lisbon data continues to overshoot, Portuguese households could face a slower pace of rate relief than neighbours in Spain or Belgium.

What This Means for Residents

• Variable-rate mortgages – Euribor has barely budged since December; a sub-2 % inflation trend supports expectations of stable to lower monthly repayments from mid-2026.

• Salary negotiations – With price growth below 2 %, unions lose the main argument for above-inflation wage demands. Companies are pointing to the government’s planned 0.3-point IRS cut as an alternative boost to take-home pay.

• Savings & deposits – Retail deposit rates recently ticked down to 1.4 % on average. Savers chasing real returns may continue to favour Treasury bills, which still yield just over 2 % after tax.

• Utilities budgeting – The ongoing energy deflation gives households scope to redirect part of their winter power budget toward higher rent or fuel costs expected later in the year.

Businesses & Investors Gauge Next Moves

Corporate treasurers welcome the softer price setting: input-cost pressures are fading, allowing tighter control of margins. Small and medium-sized firms also benefit from the government’s 1-point cut in the headline IRC to 19 %, effective this fiscal year. On the investment side, Portuguese 10-year bond yields have drifted to 2.45 %, their lowest since October 2023, as traders pencil in an ECB cut before summer.

Looking Ahead: February and Beyond

Analysts at BPI Research forecast headline inflation to hover around 2 % until September, before inching up on scheduled VAT resets for electricity. The big swing factor remains global oil prices; a fresh supply shock could rapidly reverse the comfort gained in energy bills. For now, the momentum favours consumers: slower prices, smaller rate-hike risks and a government budget geared toward tax relief and targeted welfare boosts.

Bottom line for 2026: if the current trend holds, Portugal could finish the year with its first annual inflation rate beginning with a “1” since pre-pandemic 2019—an outcome that not long ago seemed unthinkable.