Eurozone inflation holds steady at low rate of 0.2 percent

The disappointing numbers come after the European Central Bank promised to extend its programme of quantitative easing, first launched in March a year ago. Given that the rate stuck at 0.9% in December, the European Central Bank will probably soon have to give up hope of a stronger underlying price momentum this year.

Headline inflation, targeted by the ECB, held steady at 0.2 percent, missing expectations for a rise to 0.3 percent and still far short of the bank’s target, Eurostat said.

ECB President Mario Draghi said a program under which?60 billion of mostly government bonds are purchased each month would be extended by six months, through March 2017, and could be extended further if necessary.

“The ECB will not like these inflation numbers…”

Inflation in December was again dragged down by energy prices, led by oil, but this drop slowed sharply to 5.9 percent annually instead of 7.3 percent the previous month, the data showed. While the eurozone economy returned to growth in mid-2013, its recovery since then has been very modest, leaving nearly 11% of the workforce without jobs and businesses with large amounts of spare capacity and little pressure to raise their prices.

Analysts say oil prices may weigh on inflation even less in the next few months, helping the overall inflation rate to rise.

Lower oil prices have been a boon to eurozone consumers, leaving them with more money to spend on other goods and services that are produced within the currency area, unlike energy, which is largely imported.

The current weakness in oil and commodity prices reinforces the view that it will likely be a long and tortuous road to get Eurozone consumer price inflation near the ECB’s target, Archer noted. Globally, in the European Union, inflation stood at 0.1% in November.