Eurozone inflation rises to 15-month high in January

Others agree. “While the ECB may take some comfort from January’s rise in eurozone consumer price inflation and the recent spike in oil prices from their mid-January lows, there is still plenty for the Governing Council to worry about, with inflation expectations low and some signs that eurozone economic activity is being pressurised at the start of 2016 by heightened global economic uncertainties centred on China and the emerging markets and by financial market turmoil”, writes Howard Archer, chief United Kingdom and European economist at IHS Global Insight.

The ECB has launched a raft of policy measures to get credit flowing, most significantly a massive programme to buy more than one trillion euros (US$1.1 trillion) worth of public sector bonds to pump liquidity into the system.

Germany’s annual inflation reached its highest rate in eight months in January but overall price pressure remained weak, leaving analysts divided over the merits of more central bank stimulus.

Nonetheless, headline inflation has been below the European Central Bank’s target of ‘below, but close to 2%’ since early 2013.

Harmonized consumer prices rose 0.4% year-on-year, faster than the 0.2% increase seen in December.

The Eurostat statistics agency said the core inflation rate, excluding volatile energy and food costs, rose to 1% in January from 0.9% in December. A Reuters consensus forecast of economists also predicted a pick-up to 0.4 percent. The more important core inflation increased to 1.0% y/y from 0.9% previously.

“Depending on the path of oil prices, headline inflation could then stay very close to zero in the first half of this year and might even fall back into negative territory”, said Mr Loynes.

The data follow publication of the ECB’s quarterly bank lending survey, which said that financing conditions for eurozone firms were expected to improve in the current quarter. The improvement in inflation contrasted with downbeat data showing lending by commercial banks to businesses increased only 0.3 per cent in December, after rising 0.7 per cent in November.