Eurozone inflation lower than expected in December

Central bankers of the 19-member eurozone are eager to fight falling prices because they can be poisonous for the economy, creating a vicious circle of falling demand and fewer jobs.

German prices, harmonised to compare with other European countries (HICP), rose by 0.2 percent on the year after a 0.3 percent increase in November, preliminary data from the Federal Statistics Office showed on Monday.

According to a Bloomberg poll, economists expected inflation in the eurozone to rise 0.3 percent in December, which would have been its strongest reading in seven months. Italian inflation unexpectedly slowed to 0.1 percent, compared with a forecast for a pickup to 0.4 percent.

The ECB expects inflation to climb to 1 percent this year from just 0.1 percent in 2015.

The euro remained largely unchanged after the news.

Energy prices are the main cause for the subdued inflation, though their 5.9 percent drop in December was the smallest decline since July.

“And with deflationary pressures persisting elsewhere in the euro-zone, we still think that the European Central Bank will have to do more if it is to reach its inflation target in the medium term”, McKeown said. Please see our terms of service for more information. Last month, it extended its government bond-buying program and cut a key interest rate further into negative territory, measures it hopes will generate more economic growth and help get inflation back to target.

On a non-harmonised basis, German annual inflation fell to 0.3 percent in 2015 – the lowest level since 2009 – and it inched down to 0.3 percent in December.

Stripped off volatile components, unprocessed food and energy, the “core” consumer price index grew 0.8 percent year-on-year, below the 0.9 percent expected by markets and slowing down from the 0.9 percent recorded the previous month.