World Economy

Eurozone Inflation Steady

Eurozone Inflation SteadyEurozone Inflation Steady

Inflation in the eurozone remained at 0.2% in December, unchanged from November, official statistics show.

Price growth in food and some other items slowed slightly compared with November, while the drop in energy prices was also smaller, according to Eurostat estimates. The rate was lower than the 0.3% rise expected by economists, BBC reported.

The data will put pressure on the European Central Bank to act further to boost the struggling European economy.

The central bank disappointed market hopes last month with its attempts to revive the economy, which were less dramatic than analysts had expected.

The inflation figures are an early, flash estimate from Eurostat and so are not broken down by member states. It does give broad indications of which groups of products have gone up or down.

Food prices were estimated to be rising 1.2% year-on-year in December, compared with 1.5% in November.

Energy prices were falling an annual 5.9%, compared with 7.3% a month earlier. And the price of services was up 1.1%, compared with 1.2% the month before.

 Struggle Continues

The eurozone is struggling to generate inflation ten months into an unprecedented monetary policy experiment to jolt the single currency into life.

Core inflation–which strips out volatile elements such as energy–remained unchanged at 0.9%.

The disappointing numbers come after the European Central Bank promised to extend its program of quantitative easing, first launched in March last year.

The ECB cut its deposit rate to a record low of -0.3%, and made a commitment to open-ended bond purchases in the face of weak inflation in December.

However, markets were underwhelmed by Mario Draghi’s action and the latest poor inflation data could now prompt the ECB into further stimulus measures this year.

The central bank could ramp up its monthly purchases from €60 billion ($64.54 billion) to €80 billion-a-month and slash interest rates further in a bid to return inflation to the ECB’s near 2% target, according to analysts.

“We still think that the ECB was too timid in December and see it being forced to up the pace of its asset purchases before too long, perhaps in the second quarter,” said Jennifer McKeown at Capital Economics.

Germany, Europe’s largest economy, reported its lowest inflation level since the start of monetary union, with consumer price growth falling to 0.2% in December.

Inflation is now not expected to reach 1% in Germany until the second part of 2016, said Carsten Brezski, economist at ING.

The euro remained largely unchanged after the news. The single currency–which is predicted to fall below the US dollar in value for the first time since 2002–depreciated by 0.5% to $1.07.